The tension between a small but vocal minority of hawks and the still large majority of doves seems to be increasing. Today's ECB meeting will offer some new insights on who is currently on top in this bird fight
For months, the macroeconomic situation faced by the ECB has hardly changed. The Eurozone is enjoying a strong recovery, which if anything has gained momentum over the last few months. At the same time, inflationary pressures remain low. For now, the expected inflation pick-up on the back of a strong cyclical recovery is more wish than reality. The latest announcement of possible trade sanctions from the US should have increased the ECB's vigilance.
For ECB President Mario Draghi, today is all about managing expectations. Here's what we think he'll say and how markets are likely to react
With the US dollar trading soft, these small positives could amount to a fairly punchy move higher in EUR/USD today – with a potential test of 1.25 on the cards (key resistance levels to monitor are first 1.2435/45 – and then 1.2505/15).
At today's ECB meeting, we expect no hint of when QE could end, but we'll be watching the language closely. The subtle change in words should give a good indication of who is currently on top in the ECB’s in-house bird fight.
However, ECB members shouldn't forget when real bird fights, everyone loses some feathers