Euro strengthens ahead of ECB decision

The EURUSD pair was trading around the 1.21 threshold on Thursday morning as investors await the ECB monetary policy decision, due later in the day.

As the ECB previously said, it is ready to unveil more stimulus. The stimulus has to be really big, according to Lagarde’s words. The consensus looks for a 500 billion EUR addition to the PEPP (QE) program and a 6-month extension until December 2021. Some analysts and economists forecast a 6-month extension of the QE program. 

All rates should be left unchanged, while the fresh economic and inflation projections are expected to be lower than at the central bank’s latest meeting. 

The question is> how much of this is already priced in? As the EURUSD pair is up 300 pips since November, markets are ignoring the 500 billion increase in QE and are hoping for more. If the ECB disappoints investors by not providing more than expected, the EURUSD pair might continue toward 1.25.

That could cause a headache for Lagarde since stronger euro would further hinder the already weak economic growth. Especially as the Fed is about to do more easing the next week, which could undermine the greenback further.

It looks like we are due for a big show today! 

Source: https://www.axiory.com/market-news/euro-strengthens-ahead-of-ecb-decision