Over the past two years, the ECB has been far more about words than actions. That was evident in the wake of Draghi’s “do whatever it takes” pledge in the summer of 2012, which helped play a key role in taking peripheral bond markets from the edge of doom and the ECB did not have to lift a finger in the process. The question is whether the same will hold true today as they meet to discuss policy. There has been more open talk regarding the possibility of some form of quantitative easing in the Eurozone, but will we get actions rather than words? Probably not, but the question is what impact the press conference may have on the currency, should the ECB still continue to hint of potential policy measures to come. This could well be needed if EURUSD is to remain below the 1.40 level near-term, but it’s difficult for the ECB to fight the flows in the longer-term, which continue to offer underlying support for the single currency.
Elsewhere, the Aussie is pushing three week highs vs. the dollar in the wake of the latest employment data, which showed a greater than expected rise in headline employment, as well as a fall in the rate to 5.8%. The Aussie has been the strongest performer over the past week as along with the other dollar bloc currencies. Also worth keeping one eye on sterling as the MPC decision is due today, but risk is low as statement is rare without a change in policy. There is an increasing focus on the potential for other policy measures to counteract the strength in the housing market, which places a strong focus on next week’s Inflation Report and also the upcoming Financial Policy Committee meeting.