ECB Rate Decision May Matter More for Sentiment vs. the Euro

2016-06-02 07:59:00 Ilya Spivak

Talking Points:

ECB rate decision likely to generate risk-linked vs. Euro-centric impact
Readiness to act on stimulus expansion, counter “Brexit” spillover key
Aussie and NZ Dollars fell, Yen rose as BOJ’s Sato fueled risk aversion

All eyes are on the ECB interest rate decision in the hours head. The central bank is widely expected to offer no changes to the existing policy mix as President Mario Draghi and company wait to gauge the impact of stimulus efforts announced earlier in the year. This suggests the announcement’s impact will take on sentiment-guiding rather than Euro-specific dimensions.

Traders will probably want to be reassured that further easing options are ready to be deployed if necessary. Growth has slowed and inflation has fallen back into negative territory since the beginning of the year, so policymakers may be expected to show a sense of urgency on this front. This might take the form of setting a timetable for policy reassessment, thereby implicitly signaling when more accommodation might emerge.

Commentary on the potential for spillover in the event that the UK opts to exit the EU at the upcoming referendum may also prove market-moving. While the ECB is unlikely to wade into the politics of the issue, projecting a sense of readiness will matter considering the period of uncertainly following a “Brexit” vote will hamper two-way trade and hurt Eurozone exporters as well as those across the English Channel.

A concretely dovish posture may boost risk appetite, with higher-yielding majors like the Australian and New Zealand Dollars recovering from overnight weakness alongside stock prices. Both currencies slumped while the anti-risk Japanese Yen rose as Asian shares slumped following acutely downbeat comments from BOJ policymaker Takehiro Sato. On the other hand, a status quo wait-and-see posture may prove disappointing and amplify risk-off dynamics.

Are traders long or short the Euro ahead of the ECB rate decision? Find out here !

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	Monetary Base (YoY) (MAY)	25.5%	-	26.8%
23:50	JPY	Monetary Base End of period (¥) (MAY)	386.7t	-	386.2t
01:30	AUD	Trade Balance (APR)	-1579m	-2100m	-1971m
01:30	AUD	Retail Sales (MoM) (APR)	0.2%	0.3%	0.4%
01:30	JPY	BOJ’s Sato Speaks in Kushiro	-	-	-
05:00	JPY	Consumer Confidence Index (MAY)	40.9	40.1	40.8

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
08:30	GBP	Markit/CIPS UK Construction PMI (MAY)	52.0	52.0	Medium
09:00	EUR	PPI (MoM) (APR)	0.1%	0.3%	Low
09:00	EUR	PPI (YoY) (APR)	-4.1%	-4.2%	Low
11:30	USD	Challenger Job Cuts (YoY) (MAY)	-	5.8%	Low
11:45	EUR	ECB Main Refinancing Rate (JUN 2)	0.00%	0.00%	High
11:45	EUR	ECB Deposit Facility Rate (JUN 2)	-0.40%	-0.40%	High
11:45	EUR	ECB Marginal Lending Facility (JUN 2)	0.25%	0.25%	High
11:45	EUR	ECB Asset Purchase Target (€) (JUN)	80b	80b	High
12:30	EUR	ECB’s Draghi Press Conference	-	-	High
14:00	EUR	ECB’s Draghi, Nowotny Speak in Vienna	-	-	Medium