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What Can We Expect from the ECB Rate Decision and What Impact Will it Have on Euro (EUR) Exchange Rates?

EUR Exchange Rates on Hold as ECB Back in Spotlight

The European Central Bank (ECB) looks set to leave interest rates on hold once again today, following the conclusion of the bank’s September policy meeting.

That’s not to say that there won’t be any news from the bank at all however, with the ECB expected to firm plans to wind down its stimulus programme by the end of the year, while also potentially revising its macroeconomic forecasts…

This leaves Euro (EUR) exchange rates to trend narrowly this morning, with EUR/GBP flat at £0.89 and EUR/USD unmoved at $1.16 as investors await more news later this afternoon.

Is the ECB Set to Wind Down QE this Year?

With ECB President Mario Draghi stating that the ECB won’t be raising interest rates until ‘at least summer 2019’ the bank’s policy statement today is likely to focus on the ECB’s plans to wind down its quantitative easing programme.

With Inflation beginning to meet targets and the Eurozone economy still showing robust if slowing growth, the ECB has been gradually tapering its bond purchases in recent months.

Analysts suggest this leaves the bank in place to end its stimulus programme by the end of 2018 and are expecting Draghi to firm up plans of how this will be accomplished in today’s statement.

Such an outcome is likely to be Euro supportive as it opens the door for the ECB to begin raising rates next week, although ultimately with the move being widely expected for some time the overall impact on EUR exchange rates may prove to be negligible.

Euro (EUR) Exchange Rates Likely to Stumble as ECB Revises Growth Forecasts

The ECB’s largest impact on the Euro (EUR) today may instead come as a result of the bank publishing its latest macroeconomic forecasts.

According to media reports these will see the ECB downwardly revise its growth forecasts for the Eurozone for 2018 and 2019.

The lower projections are expected to be in light of some patchy Eurozone economic data over the summer on top of increased global uncertainty steaming from US trade policy and Turkey’s economic woes.

EUR Exchange Rates Forecast: Eurozone PMI Figures to Drag on the Euro Next Week?

Looking past the ECB rate decision, Euro (EUR) exchange rates could come under fire next week, following the publication of the Eurozone’s latest PMI figures.

Growth in the bloc’s private sector has consistently slowed in 2018 after racing higher in 2017 and the latest PMI flash readings are expected to confirm that this trend has continued into September.

Looking even further ahead the Euro is likely to face some volatility in the coming weeks as EU and UK negotiators attempt to finally hammer a Brexit deal, with the uncertainty of the process likely to increased liquidity in the single currency moving forward.