Big ECB Day Ahead – What To Expect For Euro

The focus turns to the European Central Bank’s monetary policy announcement. In many ways, the ECB rate decision is this week’s biggest event risk. Not only will we hear from ECB President Lagarde but economic projections will also be updated. Here are the few things we know – vaccine rollout in the Eurozone is slower than in the U.S., more restrictions remain in place, the currency is strong and the ECB is more concerned about the rise in yields than the Federal Reserve. Economic data has been mixed and the Eurozone would be lucky to escape contraction in the first quarter. With that said, the global economy is recovering, more people are getting vaccinated with each passing day and the outlook is bright. So the big question for the ECB tomorrow is whether they will look past near-term uncertainties. If they put more emphasis on market volatility and increases bond purchases, EUR/USD will fall to fresh lows. However, if they maintain an air of optimism and suggest that any move taken will not be followed by further action, EUR/USD could return to 1.20.

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