Barclays on the ECB meeting
Barclays Capital Research argues that while the ECB is widely expected to leave its policy settings unchanged on Thursday, the statement language represents asymmetric risks to the EUR.
"A confirmation of the hawkish language introduced by President Draghi in Sintra (Portugal), when he suggested that "the central bank can accompany the recovery by adjusting the parameters of its policy instruments" should see only a limited sell-off in short-end interest rates, with very modest upside risks for EURUSD.
The rates market, for example, already implies almost 10bp of deposit rate hikes over the next year versus less than 3bp prior to President Draghi's speech, and throughout this time EURUSD has appreciated about 2.5%," Barclays argues.
"Dovish language, on the other hand, could see a more EUR marked retracement as investors reassess expectations of both deposit rate hikes and the pace of asset purchases," Barclays adds.
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