Tonight 7:45pm, the European Central Bank will announce the latest interest rate decision, 20:30 European Central Bank President Christine Lagarde will hold a press conference. It is expected that interest rates and asset purchase policies will remain unchanged. The Pandemic Emergency Purchase Plan ( PEPP ) will maintain the current rate of approximately 80 billion euros, and the Asset Purchase Plan ( APP ) will be maintained at 20 billion euros per month.

 

On July 8 , after a 19 -month strategic evaluation , the European Central Bank released the results of its monetary policy strategy review. It adjusted the medium-term inflation target for the first time in 20 years, setting the inflation target at 2% , and when interest rates were near the bottom. Tolerate high inflation rates. Therefore, this meeting is expected to correspondingly change its policy guidelines and promise to adopt strong monetary policy response measures to achieve this goal, but there will be no major adjustments in the policy outlook.

 

The new policy framework means paving the way for a longer period of easing. If the European Central Bank clearly states that the policy interest rate remains unchanged and the net purchases according to the asset purchase plan will last longer than the market currently expects, for the euro Naturally constitute downward pressure. It is reported that in early July , policymakers disagreed on how to adjust the policy guidance to meet this commitment, and ultimately postponed the decision to make any changes at this meeting.

 

Bloomberg's latest survey of economists shows that the European Central Bank is unlikely to change its bond-purchase plan at this monetary policy meeting, but may make some changes in the wording of the statement. Due to the decline in financial market liquidity, monthly purchases in August are expected to fall by 5 billion euros to 75 billion euros, and purchases in October will slow down significantly.

 

Another highlight of this meeting is whether the European Central Bank will extend the pandemic emergency asset acquisition plan, which will expire in March next year , but the market is generally expected to wait until September to announce the adjustment plan because the latest update will be announced at that time. economic and inflation forecasts, there is the opportunity to begin to reduce the size of the debt purchase, and next year 3 stop buying before the end.

 

Or it is not until the end of the year that it is clear to the outside world how to transform, if it is extended, it may "transition to a new model", introduce new stimulus policies, maintain a high degree of flexibility in asset purchases, and do not rule out the introduction of more standardized unconventional tools. Under PEPP , the European Central Bank can buy bonds wherever it deems necessary, and there is no pre-set quantity quota. The market currently believes that both possibilities exist, but are slightly biased towards the former, so see if there are any hints at this meeting.

 

In terms of economic description, it is expected that the European Central Bank will maintain a cautiously optimistic outlook on the economic recovery of the Eurozone. However, the spread of the variant virus brings uncertainty and even risks. Because some regions may face a new round of blockade, it strengthens the ECB’s Dovish stance. In addition, any gentle interpretation of the results of the strategic evaluation will highlight the downward trend of the euro/dollar. It is just that the market has priced in this possibility in the past two weeks, so the expected pigeon tune will not suppress the euro too much.

 

Yesterday, the euro rebounded after hitting a low of three and a half months. The dollar’s ​​fall from the high level provided room for a rebound. The euro is expected to consolidate within a narrow range before the announcement of the resolution , trading between the 10 and 50 moving averages. If the ECB maintains it tonight Dovish, but if there is no more easing signal and the US dollar does not bring pressure, the euro is expected to break the 1.1800 marks and look towards the 1.1852 level and approach the top of the channel. On the contrary, if the European Central Bank hints that it will extend the PEPP next month without mentioning the scale of reduction, the euro may turn around and approach the bottom of the 1.1750 channel.

 

 

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