ECB Preview: Verbal intervention amid euro strength

The European Central Bank (ECB) monetary policy decision is much-awaited on Thursday. The ECB is likely to leave its monetary policy settings unchanged in September. President Christine Lagarde will address the post-policy press conference at 12:30 GMT after the release of the policy statement at 11:45 GMT, FXstreet’s Dhwani Mehta reports.

Key quotes

“Despite the recent negative developments, the ECB is set to announce no changes to its monetary policy settings for the second straight month in September, having expanded its Pandemic Emergency Purchase Program (PEPP) with EUR600 billion in June.”

“Lagarde’s take on the appreciation in the euro will be closely eyed. The bank’s policymakers voiced their concerns over the euro surge, which is seen undermining the nascent economic recovery and could exert additional downward pressure on inflation. With the rates likely on hold, the least the ECB could do is continue with the verbal intervention to contain the rapid rise in the shared currency and ease the concerns.”

“The leak of the bank’s forecasts, as reported by Bloomberg, points to more optimism on the outlook. The ECB is said to revise its 2020 GDP estimates higher amid stronger private consumption. Given the strong Retail Sales, the mild upward revision to the forecasts could have a temporary positive impact on the euro.”

“The cause for concern for the market still remains the ECB’s inflation forecasts, which could be revised down amid stuttering recovery.”