Today’s ECB announcement could panic markets

Currency traders will spend the morning trying to second guess what the European Central Bank will say. Good luck with that. 

EUR/USD has stabilised in the last few trading days, but still sits some 300 pips off its October highs after last week’s aggressive move lower. Speculation has intensified that the ECB will announce a cut to the base rate. The general opinion among the IG analysts is that this is unlikely: although there are reasons why a cut should be made, the ECB does not have a reputation for making decisions quickly, and this would represent a sizeable shift in its thinking in a short space of time. However, stranger things have happened.

Traders will also be mindful that tomorrow will see a raft of countries posting their trade balance figures throughout the morning. And in the afternoon the US will post its latest unemployment rate, which is expected to have ticked higher.

All of this adds up to a huge amount of uncertainty and speculation, which goes a long way to explaining the relative inactivity of the EUR/USD rate this morning.

Spot FX EUR/USD chart

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