ECB the key highlight on the day


It's a quiet start going into the European open but risk tones are still relatively softer over the past few sessions, with a bit of a loss in momentum from the past two weeks.

In the context of the big picture and the rally in equities since last year, it isn't anything that is out of the picture but it is always worth paying attention to the risk factors weighing on sentiment as of late. From yesterday:


As such, just keep an eye on that as market participants may look for any excuse to engage in profit-taking especially when there is a lack of catalyst to liven up the mood.

Looking ahead today, the ECB is the main event on the agenda in Europe so expect that to grab all the attention during the session.

0600 GMT - Germany July trade balance data

Prior release can be found here. German trade conditions have shown a marked improvement in recent months and the trend is expected to keep up amid the recovery.

1145 GMT - ECB announces its September monetary policy decision

The July decision can be found here. The big question is whether or not we will see the ECB scale back on its PEPP purchases and it is going to be a close call. The current pace of purchases are roughly €80 billion per month but we could see the central bank pull that back to perhaps €60-70 billion per month instead. This is all in part to do with the optics in trying to match with the supposed "better" economic outlook and high inflation but this would arguably just be an operational/technical decision more than anything else. Even if they do scale back on PEPP purchases today, eventually they will have to step up APP purchases when the time comes in March 2022 i.e. after the pandemic era comes to a halt. Unless inflation threatens to hold above their 2% target for a prolonged period next year, the ECB may prefer more flexibility when it comes to accommodative policy and that means any taper here won't really be a taper at all in the grand scheme of things.

1230 GMT - ECB president Lagarde press conference

The presser will focus more on the projections and on any decision to scale back on PEPP purchases. But when all is said and done, I'd expect the general view in the market to be "a lot of words but a whole lot of nothing" in terms of actual shift in policy stance.

That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.