Today the focus of the market is the results of the ECB meeting on monetary policy. Markets are waiting for statements on the prospects of incentive programs for 2018.
For the last three months, market participants reacted vividly to the ECB president's hints about the possibility of stopping stimulus measures. This caused a solid strengthening for the euro in the currency markets. The latest data from economic statistics also show a full justification for either reducing incentive measures or ending them altogether.
It can be assumed that if the ECB does not report on its plans, and we are inclined to this idea because the German chancellor is important from the political and economic point of view, it will put pressure on the euro, enough for it to go into a correction. However, for the time being, a slight decrease is expected. This variant of the development of events will be fully associated with the result of the electoral campaign of A. Merkel in Germany. Her victory can become the basis for deciding the fate of incentives.
The ECB faces a really difficult task. On one hand, economic growth and an increase in consumer inflation to around 1.5% indicate the need for an end to stimulus measures, but on the other hand, the US experience suggests that after a period of economic remission, a crisis may come. In other words, after a sharp rise in inflation to 2.2% at the turn of 2016 and 2017, it's time for a decline. Core inflation, which is guided by the Fed, declined in growth to 1.4%.
Observing this, the ECB should also take into account such a scenario. The stronger growth of the euro has already begun to have a negative impact on the German economy, which is export-oriented. Strengthening the euro market leads to financial losses and difficulties in the competitive struggle in world markets. Therefore, the ECB has yet another important task to do, something that would help "pin down" the rate of the euro. Whether it will be possible for the ECB and its leader to accomplish this syllable, it is difficult to say. The result of the meeting and the comment of M. Draghi will show it today.
Forecast of the day:
The EURUSD pair is growing before the ECB meeting on monetary policy. If no signals from either the bank or M. Draghi give the markets an idea of the incentive measures, we can expect the pair to adjust to the level of 1.1800 after overcoming the 1.1890 mark.
The EURGBP pair is trading above 0.9135. If the ECB meeting's results is not in favor of the euro, it will lead to a local fall of the pair to 0.9080 after a decline below the level of 0.9135.
