The European Central Bank (ECB) is set to leave its policy unchanged in April. While the Frankfurt-based institution announced it would bring forward some of its support in its March meeting, the view could be significantly different this time. That could lift the euro. Here are five reasons for a rosier message, according to FXStreet’s Analyst Yohay Elam.
EUR/USD has room to rise on expectations that the ECB would scale back its PEPP plan
“The EU recently announced a boost of 50 million doses of the Pfizer/BioNTech doses are coming this quarter, and regulators may give the green light to Johnson & Johnson’s jabs by the time the ECB convenes. Accelerated prospects of exiting the crisis could be reflected in the bank’s comments.”
“While some economies are still under a lockdown and COVID-19 infections are high, businesses are optimistic. The German ZEW Economic Sentiment, the Sentix Investor Confidence and Markit’s Purchasing Managers’ Indexes have been rising and surprising to the upside in recent months. To make forward-looking assessments, the ECB looks at these gauges of future activity and it may also shape their upbeat outlook.”
“The US recovery is set to lift the global European economies, and is also a factor in Lagarde’s considerations – and that is before President Joe Biden passes his vast infrastructure bill.”
“Yields remain depressed, helping governments raise money and support the recovery. Under these circumstances, the bank may continue buying bonds at a sluggish pace, printing fewer euros while the economies continue recovering.”
“Any hint that the bank’s Pandemic Emergency Purchase Program may not run its full course – refrain from using the ‘full envelope’ as the ECB says – could also be euro positive.”