The irony of today that so much has been written about the impending ECB meeting, despite the fact that ECB officials have pretty much told us what will happen. The details of course are lacking and indeed their impact on the currency, both immediately and beyond today. Rates are set to be cut, the deposit rate put into negative territory, with the ECB likely to prefer to pump further cash into the banking system dependent on it being used for lending, rather than being hoarded as has been the case previously. The notion that the ECB is going to embark on QE and must therefore be negative for the currency is weakly placed, as is the belief a negative deposit rate is also going to be an outright negative for the currency. The case was stronger a year ago when so much more cash was being parked back at the ECB, but since then it has fallen by 80%, so the impact will be marginal at best. For today, if anything, the risks are skewed towards disappointment in terms of the overall package of measures, which could leave the euro at risk of some short-covering. Beyond that, our belief remains that the measures are unlikely to be that euro negative. The only risk is that we see some pointed comments from ECB President Draghi aimed at pushing the currency lower.
UK rate announcement also seen today, but no surprise expected here. The minutes to the meeting in two weeks could start to see at least one member voting for higher rates, so this will be the bigger risk emerging from this meeting. Sterling is hanging close to the 1.6750 level on cable.