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The European Central Bank is expected to keep the rate at the current level of 0.00%, however, by far the most anticipated aspect of Wednesday's gathering of key economists would be the press conference, following the data release, as investors would like to hear any hints from Mario Draghi and his colleagues about the state of the European economy and whether their expectations for moderate economic growth until the end of the year remains gloomy.
During the last rate decision on the 7th of March the ECB and Mario Draghi stated that because of the prolonged hindrance of global economic trade and the worse-than-expected inflation rate, the ECB plans to target that same inflation issue at its core, by introducing TLTRO 3 – a third instalment in a series of targeted long-term refinancing operations, which are meant to make it easier for commercial banks to lend money to small and medium investors (you can read more about the functioning of TLRO III and the outcomes of the last ECB interest rate decision here).
As we have already stated in our more recent market analyses, the key factor for the poor expectations for sustained economic growth in the bloc for the following months remains to be the weak inflation data and that is why the markets are most likely to react to any potential news or statements, that are released by Mario Draghi on Wednesday.
As a consequence of the last refinancing rate meeting of the ECB in March, the markets reacted negatively to the expressed concerns by the top economists in Europe regarding the bleak outlook for economic growth. That happened even with the strong support for the TLTRO 3 program by Mario Draghi, which only signifies the importance of the aforementioned inflation rate.
As a result of that last refinancing rate meeting of the ECB, the EUR depreciated against all of its major counterpart currencies and the daily price change of the EURCHF currency pair registered a drop of 0.36%. With the new policy decision only in a few days, the market is bracing once again to hear what Draghi has to say, and as per usual, the most significant volatility spikes can be expected to be triggered by any mentions of concerns or fears over the economic growth.
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