Finally! The day has come, the European Central Bank (ECB) will finally show us what it´s made of. With the core inflation declining further and last month´s global turmoil in the financial markets, the ECB has increased its bearish rhetoric. The market is expecting a further rate cut and additional QE. Will the ECB meet these expectations or will they not deliver? If you remember back in December the market had the same expectations, based on what the ECB (and in particular Draghi) had commented in the previous couple of months, but they failed to meet these expectations and the Euro rallied for about 500 pips.
Will the ECB and Draghi satisfy the market?
So we don’t know how far they are going to go, or even how far they can actually go with the monetary policy easing and the QE program. We don’t know what other tools they have at their disposal as well. Is Draghi going to pull another rabbit from his hat? Trading such events and in such conditions is pretty much a gamble. We do have an open EUR/USD long-term sell forex signal which we hope to get at least 100 pips from, but you never know. Draghi might deliver but the market expectations are high already so will he satisfy them? In my opinion, the ECB will have to do both; increase the negative rates for deposits and add to the QE program immediately to satisfy the market. Anyway, we´ll hear their decision in about an hour.
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