The European Central Bank meet this week, preview below.
- Meeting Thursday 16 July 2020
- Policy announcement at 1145GMT (policy likely unchanged)
Euro forecast via Danske (this from late last week):
- We remain constructive and expect the broad USD to decline over the coming months
- 3 month forecast is 1.15
On the upcoming ECB policy meeting
- we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections.
- We also expect they may decide not to use the EUR1,350bn PEPP envelope in full.
- No new initiatives are expected next week
- Markets may not be prepared for a ‘less dovish’ message
- with abundant liquidity, PEPP and APP still ongoing
- Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads.
For spot FX,
- the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg
