The ECB meeting is coming up at a delicate time for markets
MUFG Research discusses its expectations for this week's ECB meeting on Thursday.
"The ECB meets this week and with the outlook worsening there is certainly an expectation that President Lagarde will signal a strong potential for additional easing at its next meeting in December...We certainly do not view any signal of increased PEPP in December as a signal to sell the euro. EUR/USD will be more determined by how the Fed acts to reinforce its new monetary policy framework of keeping rates lower for longer in order to lift inflation above the 2.0% target level," MUFG notes.
"But that is not to say the macro-economic backdrop in Europe can be entirely ignored and government actions taken over the weekend will weigh on EUR performance. In Italy all bar and restaurants will have to close at 6pm for the next month. Gyms, swimming polls, theatres and cinemas will also close and movement beyond local areas is discouraged. Spain has adopted a nationwide curfew between 11pm and 6am. The ECB is likely to feel compelled to play its part and we should not entirely rule out action at the meeting on Thursday," MUFG adds.
