ECB policy meeting likely to be uneventful – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the euro has rebounded early this year ahead of today’s ECB policy meeting which poses some further modest upside risk.

Key Quotes

“The ECB has received positive news on both economic growth and inflation in the euro-zone since their last policy meeting. The euro-zone economy appears to have gained further upward momentum at the end of last year while headline inflation is being lifted by the rebound in energy prices. If ECB President Draghi acknowledges the favourable developments, it could offer some modest support for the euro.”

“However, it is likely that President Draghi will maintain a cautious tone stressing that there has been little evidence of pick up in core inflation pressures yet. It is too soon for the ECB to adopt a less dovish tone after just agreeing last month to extend QE until the end of this year. By maintaining loose policy throughout this year, it should help to keep the euro weak.”