Barclays Capital FX Strategy Research argues that ECB risks are skewed towards a dovish statement on Thursday, but a more hawkish statement (in line with Barclays’ economists’ view) would be disruptive.
“A change in ECB forward guidance or risk assessment is widely anticipated at its Thursday meeting. While this suggests an unchanged statement would likely weigh on the EUR and support a rally in European equity and fixed-income asset prices, a more hawkish statement in line with our economists’ expectation of a removal of the reference to lower rates along with other adjustments may do the opposite.
On balance, risks to market expectations appear skewed to only a slight reduction of policy accommodation given actual and expected inflation trends and the experiences of other major central banks in more cyclically advanced economies,” Barclays argues.
EUR/USD is trading circa 1.1260 as of writing.
Source: Barclays Research
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