EUR: ECB Should Express Its Concerns At ECB Meeting But Not Expecting Much Impact on EUR – BofA

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The ECB holds its monthly policy meeting later on Wednesday. What can we expect from the meeting?

Here is their view, courtesy of eFXdata:

Bank of America Global Research discusses its expectations for today’s ECB policy meeting. 

The ECB should express its concerns in this week’s meeting, in our view. The COVID-19 situation is fragile, and the cold weather season has barely begun. It is unclear if recent restrictions are enough. Eurozone core inflation is likely to weaken further, in our view, from already historic lows. Brexit remains unresolved and the recovery fund could be questioned and delayed. We could do with certainty that more ECB support is coming in December. “Committees being tasked” would be a very clear signal, but maybe that is expecting too much this week,” BofA notes 

“In this context, we do not expect much from the ECB this week. A signal for PEPP expansion in December should already be mostly priced in, with risks for disappointmentAny indication for open-ended and inflation linked-PEPP would be a market surprise, in our view, but again, the communication for such a move would be important to determine the EUR impact. In any case, we believe that in the short term the EUR depends more on globalCOVIDand USelectionsfactors, than the ECB. The EUR is not currently overvalued in our viewour EURUSD equilibrium estimate is 1.23but the recent collapse in Eurozone inflation would justify a weaker EUR, in our view,’ BofA adds. 

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.