All Eyes on the ECB

Expectations ahead of today’s April ECB meeting are fairly muted. Last time around, the ECB announced that it would be significantly increasing the pace of its bond purchases in a bid to bring yields down, which had been rising sharply at the time. On that front, the ECB has been successful with yields having retreated firmly since then.

In terms of the bank’s economic assessment, the view is likely remain that the recovery is underway but downside risks remain. Extended lockdowns and slow vaccination progress remain the biggest threat, however there has been no escalation in this area meaning that the bank is likely to simply reiterate its message.

With a new set of forecasts not due until the June meeting, that feels like a more approximate time for the bank to make any adjustments and so the focus at this meeting will be on forward guidance. If the bank feels the balance of risks has improved, this could see EUR trading higher. Similarly, if the bank feels the balance of risks has worsened, this could see EUR trading lower.

The only area which could cause some really market action this time around is how Lagarde responds to the inevitable questions on recent EUR strength. Any words of concern should send EUR lower while if the bank says it is not concerned with the recent rise, this could greenlight a further rally in EUR.

Where to Trade the ECB Meeting?

EURJPY

This pair still feels like it is itching to break higher. Price has been stuck in a block of consolidation below the 130.69 level and recently saw a failed break of the level. However, no sell off has materialised and while the bull channel holds, a move up to the 132.02 level still looks good.

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