The euro trade this week is all about Thursday’s ECB decision and whether or not Draghi signals a shift toward sovereign QE but there is another factor at work as well — seasonals.
December is easily the best month on the calendar for the euro. Over the past 20 years, the euro (or equivalent) has gained an average of 1.44%.
EUR seasonals
If Draghi launches QE next week, there is no saving the euro but if he takes more of a wait-and-see approach rather than sending a signal QE is coming, there is plenty of scope for a rally. If the take-up in the TLTRO is good, it would add to the trade.
The FT is out with its preview and points to comments from ECB #2 Constancio who last week said policymakers wanted to wait and see how current programs perform. Nevermind staunch opposition from Lautenschlaeger, Weidmann and Mersch.
