What to expect from the ECB today

Nomura's opinion

The most important signal that we need to monitor at today's meeting will be the targeted long-term refinancing operations and the future of the key interest rate.

Although the real solution can be postponed to April or June, we remain in the opinion that Mr. Draghi will propose a new target for Targeted Long-term Refinancing Operations (TLTRO) in the coming months.

About the future of the key interest rate - for the moment there is no need to make any changes, but for sure the central bank will change its tone in June.

The ECB's forecast for growth and inflation will reflect the announcement that more time is needed to analyze possible surprises of a temporary and permanent nature.

In pure FX language all this means that this meeting will not differ much from the previous ones. As we already know, Mario Draghi is the king of mixed signals. He can make a 30-minute statement without stopping talking and not actually saying anything. My personal expectation is the increased volatility of the euro and short-term movements in both directions. The EUR / USD is close to supporting medium-term consolidation, so the possibility here is an eventual decline to pick up stops below the zone, which will accumulate additional sales and impulse in descending order. This will create new short positions with a stop inside the chop. On Friday, there is a NFP in the US, which will most likely tip the balance back to the dollar. The main reason for this is that the effect of government closure is declining, but expectations remain low. The previous month had 340K new jobs, and expectations for this are around 180K. Better results will be reflected in purchases of the dollar, which will take the stops on the shooters on Thursday and will return the pair back to the range / for any time now /.

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