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Analysts at TD Securities (TDS) offered a brief preview of next week’s important European event risk, the latest monetary policy update by the European Central Bank (ECB).

Key Quotes:

Draghi’s final ECB meeting is likely to be a dovish one. Inflation expectations are likely still at record lows, inflation has disappointed, and GDP growth will need to be revised lower again in December. We think that markets are being complacent about the odds of another rate cut this year, even if they won’t be able to price that in until after we get a better idea of Lagarde’s view on monetary policy.
The ECB looks unlikely to provide EURUSD with a strong directional cue. A lack of fresh policy initiatives keeps attention elsewhere. A dovish message could temper recent gains, but EUR should remain more sensitive to Brexit developments and broader risk appetite.
The market reaction should be relatively muted at the next week’s meeting. The key driver for risk sentiment will be the developments on the Brexit front in the coming week. With respect to monetary policy, market focus does turn to the implementation of the ECB’s tiered deposit system on October 30 as well as the start of the new QE purchases from November 1.