Today, the spotlight will fall on the ECB decision. No change in policy is expected, so focus will be on hints around QE, and whether Draghi will talk down the euro. The greenback had another bad day as the US Treasury Secretary talked in favor of a weak currency, while the pound got an extra boost after the stellar UK employment data.
Will Draghi Echo His Colleagues and Talk Down the Euro?
The euro traded mixed yesterday ahead of today’s ECB policy decision. The common currency outperformed once again against the greenback, which was pushed lower on comments from US Treasury Secretary Mnuchin (see below), and the Kiwi, which slid after New Zealand’s CPI showed that the nation’s inflation rate declined to +1.6% yoy in Q4 from +1.9%. The euro fell the most against the pound, the rally of which was fueled by the robust UK employment report (see below).
Today, all lights are likely to fall on the first ECB policy decision for 2018. Since the last time policymakers met, we have had a lot of developments that rocked the boat. Initially, several officials expressed their preference for a clear QE end in September, while the minutes of the latest meeting revealed that the forward guidance and language around policy could be revisited in early 2018. The euro enjoyed massive gains following the minutes. A few days later, a report hit the wires, noting that the Bank will not proceed with any changes in language and guidance at this meeting. A possible option is the March gathering, the report noted.
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