This week’s ECB meeting dominates the agenda, but after last week’s events on the Swissie, there is nothing that they are going to do that will match up to last week’s volatility. There is talk in the German press (Spiegel) that the President of the ECB has briefed both the German Chancellor and Finance Minister on the ECB’s plans. We are now at the stage that there would be severe disappointment if the ECB did not follow through and announce something this coming Thursday. The market reaction will depend on the size, the finer details and also the timing of its implementation. If in combination they fall short of expectations, it’s quite conceivable that the euro could rise, given the extent to which a move to QE is already in the price.
Elsewhere this week, we see retail sales, production and GDP data from China tomorrow, together with the ZEW survey in Germany. There is also labour market data and BoE minutes on Wednesday, with the BoJ also issuing a policy statement on Wednesday. After last week’s events, there is understandably a sense of risk aversion in markets and not only in FX. Chinese equities are down sharply today as the authorities have clamped down on leverage in the wake of the strong surge in stocks in recent months (up 44% 3 months to Friday). The Swissie itself has settled just above the parity level on EURCHF, with USDCHF resting just above the 0.86 level.