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EUR Steady on ECB Minutes But June May See Change

EUR Steady on ECB Minutes But June May See Change

Nick Cawley, Senior Strategist

Talking Points

- The single currency eased a touch after the recent rally.

- The June ECB meeting may see policy language change.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

The recently released minutes of the last European Central Bank (ECB) monetary policy meeting differ little from other releases this year. But this may all be about to change at June’s meeting and traders need to be aware of any change in central bank language, however small it may be. The staff projections are published four times a year. In March and September they are produced by ECB members and in June and December they are produced jointly by Euro-Zone national central banks and ECB members.

According to the minutes of the last meeting, council members generally agreed that growth prospects for the single-bloc had ‘further improved’ while given the continued uncertainty ‘the outlook for inflation remained fragile.’ At the next meeting in June, the council will have the latest staff projections to help guide them, putting them in a better position to take stock and reassess the sustainability of the recovery and the outlook for inflation.

And when parsing the next ECB statement, one line to look out for is the following, especially the words in bold.

“The Governing Council continued to expect the key ECB interest rates to remain at present оr lower levels for an extended period of time, and well past the horizon of the net asset purchases.”

The removal of ‘or lower levels’ would give the market a clear steer that President Draghi sees inflation risks receding and that the General Council has already begun talks towards monetary policy normalization. A firm pointer that rates are not going lower would underpin the single currency and push bond yields higher. To give himself flexibility, in case inflation does not become entrenched, Draghi will likely repeat that the current level and duration of QE could be increased and/or extended.

The EUR edged slightly lower over the session, as the USD clawed back a small part of Wednesday’s losses while GBP jumped on much better-than-expected retail sales numbers.

Chart: EURUSD Daily Timeframe (January 24 – May 18, 2017)

Chart by IG

--- Written by Nick Cawley, Analyst

To contact Nick, email him at

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