Talking Points:

  • ECB unlikely to expand stimulus effort at September meeting
  • Updated economic forecasts may foreshadow policy direction
  • Changes in QE-eligible asset mix may trigger Euro volatility

The ECB monetary policy announcement headlines the economic calendar in European trading hours. Euro area financial conditions have stabilized having recovered from stress in the aftermath of the UK “Brexit” referendum. Meanwhile, the year-on-year inflation rate has drifted toward the top the range prevailing since mid-2015 having steadily improved since April. On balance, this hints that policymakers probably don’t feel pressured to expand an already aggressive monetary stimulus effort that includes hefty asset purchases and a negative deposit rate.

The announcement may still generate volatility however. First, the updated set of macroeconomic projections prepared by ECB staff may be telling, with the direction of revisions hinting which way the central bank may steer in the months ahead. A downgrade of the inflation outlook may imply that further easing is on the horizon and weigh on the Euro. Needless to say, an upgrade that undermines the case for near-term stimulus expansion could have the opposite effect.

Second, investors will look for clues about potential changes in policy implementation as ECB President Draghi gives a press conference following the announcement. The central bank is soaking up so much paper as to spark concerns about insufficient liquidity in those assets it has deemed acceptable for purchase. If policymakers’ promise to boost accommodation as needed is to be seen as credible, they may need to expand the range of securities that qualify. Doing so or signaling such a step is imminent may be enough to put pressure on the single currency.

Are retail traders buying or selling the Euro ahead of the ECB announcement? Find out here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:55

AUD

RBA's Lowe Intro Remarks at Conference

-

-

-

23:01

GBP

RICS House Price Balance (AUG)

12%

2%

5%

23:50

JPY

BoP Current Account Balance (¥) (JUL)

1938.2B

2073.3b

974.4b

23:50

JPY

BoP Current Account Adjusted (¥) (JUL)

1447.8B

1573.7b

1648.4b

23:50

JPY

Trade Balance BoP Basis (¥) (JUL)

613.9B

571.2b

763.6b

23:50

JPY

GDP SA (QoQ) (2Q F)

0.2%

0.0%

0.0%

23:50

JPY

GDP Annualized SA (QoQ) (2Q F)

0.7%

0.2%

0.2%

23:50

JPY

GDP Nominal SA (QoQ) (2Q F)

0.3%

0.2%

0.2%

23:50

JPY

GDP Deflator (YoY) (2Q F)

0.7%

0.8%

0.8%

23:50

JPY

GDP Private Consumption (QoQ) (2Q F)

0.2%

0.2%

0.2%

23:50

JPY

GDP Business Spending (QoQ) (2Q F)

-0.1%

-0.4%

-0.4%

23:50

JPY

Bank Lending Incl Trusts (YoY) (AUG)

2.0%

-

2.1%

23:50

JPY

Bank Lending Ex-Trusts (YoY) (AUG)

2.0%

2.0%

2.1%

01:30

AUD

Trade Balance (JUL)

-2410m

-2700m

-3250m

02:00

JPY

Tokyo Avg Office Vacancies (AUG)

3.90%

-

3.94%

02:35

CNY

Trade Balance (CNY) (AUG)

346.03b

373.00b

342.80b

02:35

CNY

Exports (CNY) (YoY) (AUG)

5.9%

2.9%

2.9%

02:35

CNY

Imports (CNY) (YoY) (AUG)

10.8%

0.7%

-5.7%

02:41

CNY

Trade Balance ($) (AUG)

52.05b

58.85b

52.31b

02:41

CNY

Exports ($) (YoY) (AUG)

-2.8%

-4.0%

-4.4%

02:41

CNY

Imports ($) (YoY) (AUG)

1.5%

-5.4%

-12.5%

04:30

JPY

Bankruptcies (YoY) (AUG)

14.87%

-

-9.52%

04:30

JPY

BOJ’s Nakaso Speaks in Tokyo

-

-

-

05:00

JPY

Eco Watchers Survey: Current (AUG)

45.6

45.5

45.1

05:00

JPY

Eco Watchers Survey: Outlook (AUG)

47.4

46.4

47.1

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

06:00

EUR

German Labor Costs (YoY) (2Q)

-

3.1%

Low

06:00

EUR

German Labor Costs (QoQ) (2Q)

-

1.7%

Low

11:45

EUR

ECB Main Refinancing Rate (SEP 8)

0.00%

0.00%

High

11:45

EUR

ECB Deposit Facility Rate (SEP 8)

-0.40%

-0.40%

High

11:45

EUR

ECB Marginal Lending Facility (SEP 8)

0.25%

0.25%

High

11:45

EUR

ECB Asset Purchase Target (SEP)

€80b

€80b

High

12:30

EUR

ECB President Draghi Holds Press Conference

-

-

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1162

1.1204

1.1222

1.1246

1.1264

1.1288

1.1330

GBP/USD

1.3123

1.3245

1.3293

1.3367

1.3415

1.3489

1.3611

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To receive Ilya's analysis directly via email, please SIGN UP HERE

Contact and follow Ilya on Twitter: @IlyaSpivak