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Eur
The ECB is widely expected to leave rates unchanged and President Draghi
is likely to adopt a dovish tone in the subsequent press conference, an
outcome which should see EUR-USD little changed on the day. However, we
examine the potential sources of surprise for the EUR. Two of them - a rate
cut and downside risks to inflation language - would be immediately
negative for the EUR. The impact of another element on the EUR, the
characterisation of the rate cut debate, would depend on whether the “on
hold” outcome was a closer call than before. Finally, the EUR could benefit
from any surprise announcement of an unconventional policy stimulus.
The ECB is widely expected to leave rates unchanged and President Draghi
is likely to adopt a dovish tone in the subsequent press conference, an
outcome which should see EUR-USD little changed on the day. However, we
examine the potential sources of surprise for the EUR. Two of them - a rate
cut and downside risks to inflation language - would be immediately
negative for the EUR. The impact of another element on the EUR, the
characterisation of the rate cut debate, would depend on whether the “on
hold” outcome was a closer call than before. Finally, the EUR could benefit
from any surprise announcement of an unconventional policy stimulus.