FIRST ECB MEETING LED BY CHRISTINE LAGARDE AND PARLIAMENTARY ELECTIONS IN THE UK

This week the European market will focus on two key events - the ECB meeting and parliamentary elections in the UK.

The market does not expect big surprises from the ECB meeting. Most likely, the regulator will keep the interest rates unchanged. Much attention will be paid to this event because it will be the first meeting of the ECB under the leadership of the President of the European Central Bank - Christine Lagarde. Investors expect Lagarde to comment on the assessment of the current state of the EU economy and prospects for its further development. Many experts say that at the current meeting of the ECB will announce the revision of strategic goals and possibly announce new policies affecting the monetary policy. Obviously, Lagarde's comments can have a very strong impact not only on the European currency, but also on the dynamics of European stock indices.

Experts' opinions diverge in the evaluation of the ECB's further plans for the monetary policy implementation. Some of them believe that Lagarde will signal a possible easing of monetary policy in early 2020. Other experts believe that Lagarde will adhere to a neutral rhetoric, hinting at maintaining the current level of rates.


How will the outcome of the ECB meeting affect the EUR/USD pair?

Everything will depend on Christine Lagarde's speech and announced plans to change the monetary policy. In our opinion, we can expect a significant increase in volatility from the EUR/USD pair, but in general, the European currency will remain in the current trading range. Changes in ECB rhetoric alone are not enough to form a stable upward trend. It is necessary to document the improvement of the economic situation in the form of publication of good macroeconomic statistics both for the EU as a whole and for the key countries of the region.


Parliamentary elections in the UK

Political news from the UK will have an equally strong impact on the European market. Recent sociological surveys indicate that the Labour Party's gap between itself and the conservatives has narrowed. The risk of an "incapacitated parliament" is growing. Previously, investors were actively buying the British currency, betting on the victory of conservatives. This scenario is considered as the most favorable, because in January 2020 the parliament could finalize the Brexit agreement and start the next phase of negotiations with the EU. The uncertainty surrounding Brexit seriously slows down the development of the British economy and puts significant pressure on the British Pound. Now speculative investors are fixing long positions on the British currency, as it is very difficult to predict the voting results on December 12. Further rate of movement of GBP/USD pair will be defined by the results of parliamentary elections on December 13.

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