There will be caution ahead of Thursday€™s ECB council meeting. There will be some speculation that the quantitative easing programme could be expanded while there is a very small chance that interest rates could be cut again. There is also the possibility that there will be bank comments warning against Euro strength. In this environment, there is scope for a further net Euro correction weaker ahead of Thursday€™s decision, potentially to at least 1.4120 against the dollar before a fresh rally attempt.
There were reports on Wednesday from ECB sources that the central bank would consider a further cut in interest rates to below 1.0%, although there was no indication of the potential timing of such a move.
There will also be further uncertainty over the possibility of increased quantitative easing measures with the bank due to announce details of the bond-buying scheme due to be released at Thursday€™s meeting.
ECB council member Nowotny stated that the bank has the option of boosting the economy in future through further non-standard policy measures. Nowotny was also generally downbeat over the economic outlook and warned that the latest staff projections would not be very good.