- The ECB Governing Council is expected to keep the rates on hold in March with no changes made to its forward guidance yet.
- ECB staff macroeconomic projections will downgrade the grown and the inflation forecast, especially the near-term projections.
- The ECB is expected to opt for a wait-and-see policy stance rather than launch the long-debated TLTROs as lending supporting mechanism.
- The main message is expected to voice the risks to the Eurozone growth outlook tilted top the downside with the outlook for rates currency bearish.
The ECB Governing Council is expected to keep the monetary policy unchanged while downgrading its near-term growth and inflation forecasts provided in staff macroeconomic projections. The key policy message will be up to the ECB President Mario Draghi to communicate during the press conference on Thursday, March 7.
While the main message from the ECB is expected to remain broadly unchanged from January with the Governing Council echoing the risks to the Eurozone growth outlook tilted top the downside, the uncertainty is likely to hold the policymakers back in terms of launching another stimulus program just three months after the asset purchasing program ended last December.
The rate and currency market implications from the ECB meeting are rather bearish with lower macroeconomic projections on growth and inflation outlook meaning the policymakers can afford to hold back with the launch of alternative stimulus and will likely opt for a more wait-and-see approach. Even with the press conference of Mario Draghi traditionally implying higher volatility, the EUR/USD is expected to remain capped within 1.1200-1.1400.
The general assessment of the economic situation in the Eurozone is realistic but conditional, with policymakers considering the current slowdown a natural pullback after years of expansion.
The National Bank of Austria Governor Ewald Nowotny said on February 27 for the Italian newspaper La Stampa that it is natural to have a slowdown in the Eurozone economic growth after 4-5 years of remarkable expansion. “The slowdown of the European economy is significant and the ECB could change its interest-rate guidance if it becomes clear the situation isn’t temporary,” Banque de France Governor Francois Villeroy de Galhau said on February 17 for Spanish El Pais.
The launch of the long-debated targeted long-term refinancing operation (TLTROs) is probably not on the agenda yet even with the tool considered an overall success according to the ECB top officials from the Executive Board. The ECB chief economist Peter Praet said on February 19 for German newspapers Börsen-Zeitung that TLTROs have been a very useful tool to deal with impairments in the transmission of monetary policy and they are part of the toolbox, especially in the situation when the Eurozone economy was to slow more sharply.
The Eurozone composite PMI and GDP growth
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD tumbles to 2024 lows near 1.0460
The US Dollar gathers extra pace and weigh on the risk complex, sending EUR/USD to new YTD lows near the 1.0460 region as the NA draws to a close on Thursday.
GBP/USD dips to multi-month lows around 1.2570
Further losses now motivate GBP/USD to revisit the vicinty of the 1.2570 zone for the first time since early May, always on the back of the strong move higher in the Greenback.
Gold faces extra upside near term
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.