Euro will look at ECB Policy Speeches this Week

Like last week, there will not be a plethora of economic data out of the Eurozone to support the local euro currency. This means that Forex traders should not be glued to this week’s economic calendar. On Friday, the September Eurozone consumer price index will be released. That is the big event risk on this week’s euro calendar. Until then, the calendar is event risk free. Like last week, euro Forex crosses throughout the week will monitor comments from various policy makers from within the European Central Bank (ECB). Traders will also get the ECB minutes from the September monetary policy meeting.

While all of these ECB member speakers have the ability to move the euro Forex crosses, there should not be a lot of follow through to contend with. Today, we will hear from Couere, Mario Draghi and Nowotny. All are scheduled to speak today. At the end of the week we will hear from the ECB’s Chief Economist Peter Praet and ECB President Mario Draghi, once again, on Thursday. Draghi’s comments will, as always contain the most weight.

Expectation for Draghi’s speeches, this week, remain unchanged. He should keep to the dovish script as we approach the end of the year. At the September policy meeting, the ECB head spoke of the effectiveness and not the size of the current quantitative easing (QE) program. He said the program will be subjected to challenges of constraints stemming from capital key. “We tasked the relevant committees to work on the smooth implementation and the changes that are needed to ensure the smooth implementation,” said Drahi last month. He said the ECB will continue to assess the current QE and make adjustments as needed.

In all likelihood, we could see an upcoming shift in monetary policy from the ECB soon instead of another rate cut. Mario Draghi is the one that need to convince the financial markets of its nature. This should not come from the bank’s chief economist or other policy makers. It remains very unlikely that the ECB will make any large moves before the next round of SEPs are tendered at the December monetary policy meeting. What Draghi and Company will have to choose is whether or not to do away with the -0.40 percent deposit rate used to purchase debt. The supply of German debt is starting to run out or they will have to remove the key capital key ratio for them to purchase peripheral country’s debt.