Today, the markets are eagerly expecting the ECB interest rate decision and monetary policy statement and press conference. The weakness in Euro from yesterday suggests that FX market players did not factor in the full impact of the Quantitative Easing program.
The market does not expect any changes in ECB monetary policy statement in the next couple of months; therefore, we do not expected drastic moves in the currency on ECB days. It is very unlikely that they will expand the QE program before determining its success and it is also unlikely that they will have second thoughts about the program or reduce it until inflation is back up near their target.
However, we are still expecting the EUR to weaken further as the ECB is likely to keep QE in place until it has proved successful in raising inflation back to its target.
The main issues in today’s meeting will be the clarification on the ECB’s QE program due to start this month and the release of the revised economic forecasts, in particular the first forecasts for 2017.
At the moment, the Eur/Usd is trading in the 1.10461 area, having as resistance the 1.10800 level and as support the 1.10300 level. For the moment, the pair is under pressure so a break below 1.10300 could take the pair lower. On the other hand, a break above 1.10800 could see the pair rise to 1.11200.