ECB Expected To Announce The End Of QE On Thursday

This years surprise package, the Euro, is this week is facing one of 2017’s key events when the ECB meet on Thursday. While all rate decisions are important, this one is exceptional, with the ECB expected to announce the end of QE.

The Euro has been one of 2017’s best performers. While have been in control since January 1, the real momentum started when economic data turned positive for the Eurozone. As the bricks began to fall into place, including stronger inflation numbers, traders started positioning themselves for the inevitable; the end of QE in Europe. Euro longs bid higher and higher, and with the help from some loose lips in the ECB the EURUSD traded all the way up to $1.20.

What’s expected of the ECB?

In a note to clients, BTMU FX Strategy Research had this to say about the ECB meeting and their expectations:

“The main scheduled event this week will be the ECB’s much anticipated policy meeting. The ECB will unveil their plans to taper QE from next year. Market expectations ahead of the meeting are gravitating towards the ECB slowing the monthly pace of QE purchases to EUR20-30 billion and extending purchases until the end of September of next year. The ECB is also expected to emphasize that rates will remain low until well past the end of QE.

We are still awaiting the upcoming announcement from President Tump over who he will nominate to be the next Fed Chair (no exact date has been confirmed). The announcement could prove pivotal for US dollar performance heading into year end”.

Basically, nothing really new is expected, and expected is the key word here.

Where to from here?

The end of QE has been priced in over the past 4 months. This years rally has been in anticipation of the policy change, along with softer USD sentiment. This doesn’t mean, however, that price won’t move once the announcement is made.

A neutral outlook on the EUR/USD is the current market consensus. Why? Because most of the information regarding both Fed and ECB policy is known by the market. This doesn’t mean it won’t be volatile…we could see hundreds of pips in range this week. Stay safe, be aware of the news and trade accordingly.