The ECB meeting arrives today when EURUSD is testing key levels. The mid-year lows at 1.0952 is perilously close as I write, whilst the post-Brexit referendum low of 1.0913 being in the frame after that. It’s hard to see the ECB adding to its quantitative easing policy that was last expanded in March of this year, when the deposit rate was also cut by a further 10bp. That does not remove the volatility risks for EURUSD, given the habit of ECB President Draghi to throw in some verbal bombs during the press conference. Inflation remains stubbornly low, although recent rises in energy prices and also the modest fall in EURUSD will add to inflation in the months ahead. All that said, that could not be enough to satisfy the ECB, with expectation growing for more easing measures in December of this year. That’s the same time the Fed is expected to increase rates in the US, so such monetary policy divergence is usually a powerful force in terms of currency direction, which would push EURUSD lower.
The Aussie has fallen overnight on the back of the latest jobs numbers, which showed the unemployment rate steady but the level of employment falling. That took some of the wind from the Aussie’s sails, AUDUSD reversing the gains seen in the previous session. Ahead of the ECB meeting and press conference, there is retail sales data in the UK at 08:30 GMT, where both measures are seen rising slightly from the fall in August, but these numbers are often volatile.