The European Central Bank (ECB) is scheduled to hold its monetary policy meeting today, 10 April. We expect more dovishness from the ECB as we move ahead. We are now bracing for a further loosening of its monetary policy. Confidence has suffered repeated blows from a string of disappointing data on eurozone’s several biggest economies, particularly that of Germany, its powerhouse.

We believe the ECB president will emphasise the downside risks to the economic outlook, following a run of disappointing data in the eurozone and mounting concerns about the health of the global economy. Yet there will probably be no signal of any further action over the near term. Hence, it could open the door to accumulate the biggest bet against the euro vis-à-vis USD since late 2016. And backed by its rock-bottom interest rates, we see further weakness on the euro. So we expect the currency to trade at US$1.16 against the dollar instead of US$1.20.

• The European Central Bank (ECB) is scheduled to hold its monetary policy meeting today, 10 April. We expect more dovishness from the ECB as we move ahead. We are now bracing for a further loosening of its monetary policy. Confidence has suffered repeated blows from a string of disappointing data on eurozone’s several biggest economies, particularly that of Germany, its powerhouse.

• During last month's ECB meeting, its revised downwards both the GDP to 1.1% and inflation to 1.2%. And the forward guidance made it clear that its key interest rates are expected to remain at their present levels at least through the end of 2019. And it also confirmed its intention to hold a new round of quarterly targeted long-term refinancing operations (TLTRO-III), starting in September 2019 and ending in March 2021. Other details of the TLTRO‑III, which includes the incentives for credit conditions to remain favourable, should be announced in due course.

• We believe the ECB president will emphasise the downside risks to the economic outlook, following a run of disappointing data in the eurozone and mounting concerns about the health of the global economy. Yet there will probably be no signal of any further action over the near term. Hence, it could open the door to accumulate the biggest bet against the euro vis-à-vis USD since late 2016.

• At the moment, all outcomes point to a lower euro against the USD. Lingering concerns about the impact of Brexit on the eurozone are adding to the gloom. The currency has also become a popular choice for investors to sell to finance other bets, such as buying the dollar. And backed by its rock-bottom interest rates, we see further weakness on euro. So we expect the currency to trade at US$1.16 against the dollar instead of US$1.20.

Source: AmInvest Research - 10 Apr 2019