What expansionary measures will the ECB carry out this Thursday?

Weekly Analysis of the Foreign Exchange Market

Ebury, the financial institution specializing in foreign exchange trading, believes it will be difficult for the ECB to surprise at its meeting next Thursday given investors' high expectations. For this reason, it forecasts that the euro will rebound to around current levels against its major counterparts by the end of the year.

---

 

The party Thanksgiving in the USA has not impacted the trend we have seen in the Forex market in November. dollar It rebounded to new highs in recent years against its main peers, as expectations continue to strongly support that the ECB The government will announce new expansionary measures this week, and commodity prices continue to hit record lows globally.

 

European currencies continued to trade lower against the dollar. The question now is to what extent the market has already priced in the expected quantitative easing by the ECB, now that the euro has broken below 1,06, and whether the president Draghi It will at least be able to match market anticipation at Thursday's meeting. We believe it will be difficult for the ECB to surprise given investors' high expectations; therefore, we expect the euro to rebound to around current levels against its major peers by the end of the year.

 

EUR

 

Investors await further expansionary measures from ECB this Thursday.

 

Although all eyes were on the investors They are heading to the ECB meeting this Thursday; last week we witnessed the release of some solid economic data in the EurozoneThe business confidence index SMEs The index surprised slightly to the upside, rising 0,5 points to 54,4, near a five-year high. This is consistent with economic growth slightly above 2,0%, although actual figures have recently fallen short of what business sentiment surveys suggested.

 

However, currency markets virtually ignored this positive news, focusing exclusively on expectations of further quantitative easing (QE) by the ECBThese measures will be announced this Thursday. We expect three types of new measures: an expansion of the QE program, a cut in the deposit interest rate, and an expansion of the ECB's debt purchase instruments.

 

GBP

 

The autumn announcement surprised both the markets and ourselves, as it revealed smaller-than-expected cuts in public spending. However, this slight fiscal relief is almost entirely offset by tax increases. It is generally understood that spending cuts have a greater short-term economic impact, so the announcement should provide overall support for economic growth and, consequently, for the pound sterling. Thus, the markets reacted by pushing the pound higher in the hours following the news. However, the British currency's rally faded during the week, finishing slightly below the euro and the dollar.

 

USD

 

En United States More mixed economic news was released last week. Although the third-quarter GDP figure was revised upward to 2,1% from an initial reading of 1,5%, this revision was largely due to the accumulation of actual data, which are typically updated over subsequent quarters.

 

On the other hand, the trade deficit for October was slightly better than expected, and it seems that the external sector will stop detracting from growth. United Statesat least in the current quarter. This is very positive news given the relentless appreciation of the dollar. Overall, the US economy appears capable of maintaining its 2-3% growth rate and stable job creation, even with the currency appreciation, suggesting that the Federal Reserve It may begin raising interest rates at its December meeting.

 

Source: Ebury