ECB meeting preview – tinkering around the edges
In their bid to leave almost all policy unchanged, the ECB’s upcoming meeting will likely see a few tweaks in language, but no overall alterations.
ECB meeting – when and where?
The latest European Central Bank (ECB) meeting takes place on 9 June, with the decision announced at 12.45pm, followed by a press conference at 1.30pm.
What to expect
This meeting will see the release of new staff projections for growth and inflation. Growth forecasts could well remain unchanged thanks to the weaker than expected gross domestic product (GDP) figure from quarter one (Q1), but inflation may well be revised higher thanks to recent consumer price index (CPI) strength and ongoing increases in commodity prices.
Like all central banks, the ECB will have to endure questioning from journalists regarding the potential for a tapering of monetary stimulus during the year or into 2022. So far ECB statements have erred on the dovish side, with board members warning against early withdrawal of stimulus that could undermine the bank’s attempts to support the economic recovery from Covid-19. Instead, the bank may well aim to change the language around its Pandemic Emergency Purchase Programme (PEPP), removing the ‘significantly higher pace’ line from its statement, pointing investors to at least a partial slowdown in the pace of asset purchases.
What do markets expect?
Current pricing points towards a high expectation that actual policy will remain unchanged, with just a 5.1% chance of a cut versus 94.9% chance of rates remaining unchanged. This will broadly continue into the end of the year, although some dispersion in opinion can be seen for the last meeting of the year.
|Meeting date||Expected target rate||Cut||No change||Hike|
|10 June 2021||-0.5051||5.1||94.9||0|
|22 July 2021||-0.5051||5.1||94.9||0|
|9 September 2021||-0.5066||6.6||93.4||0|
|28 October 2021||-0.5054||6.5||92.4||1.1|
|16 December 2021||-0.508||8.9||90.0||1.1|
EUR/USD technical analysis
At the time of the last meeting EUR/USD was trading around $1.20, but since then the post-March rally has continued, helped along in no small way by the weakness in the US dollar. The pair touched a three-month high at $1.227 in late May, before retreating to a degree.
From the chart we can see that a descending channel/bull flag has formed since late May, although the confirmation of its status as a bull flag would require a move above $1.22. This would open the way back to the May high and revive the uptrend of the past two months. Daily stochastics have dropped back since late May but, having held above zero for the time being, continue to support the idea of a new leg higher in the rally from $1.17.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
European Central Bank meeting
Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement.
- How might the next meeting affect the markets?
- What are the key rate decisions to watch?
- Why is the Governing Council announcement important for traders?
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.