With sources pointing to more language changes from the ECB in June, will Draghi look to keep the euro's feet on the ground this Thursday?
We're still very far away from and actual move on rates, and still really probably have a taper to trade before that but the noises coming from the ECB seem to be turning more hawkish, or at least less dovish.
Folliwing last month's meeting, and the removal of the stance that they're still ready to use all instruments available, it looks like the ECB is on a path of language changes to policy, certainly if the story about further wording changes in June is to be believed.
Tomorrow, Draghi could be questioned about these supposed changes, that's if we don't get the surprise of seeing any tomorrow. My overriding thought after the story yesterday was that June is one thing, and this Thursday is another. If we know Draghi at all after all these years, we know he doesn't give a hint of anything hawkish unless he really needs to, or if he could do so without causing a fuss, so if the market does get expectant into the decision and presser tomorrow, I think it's going to be sorely disappointed.
And let's face it, chopping, changing and deleting a few lines in a statement for the ECB is not even close to an actual policy move. However, it does mark a shift closer to one, be it a taper or stopping QE altogether. And, by the way, if the ECB do stop QE I think they'll taper it off rather than stop dead, and I still think they'll start on normalising the deposit rate before they finish QE but that's all thoughts for the future.
Overall I suspect we won't get anything shocking tomorrow but be wary that Draghi might want to stomp on any hawkish expectations, at least until next month.
Trading wise, if we were still sitting up around 1.0950 odd into the ECB, I'd consider a short over the meeting. As it is now, with the euro testing 1.0850 (as I type) I'll see where we are after the Trump tax stuff, and just before the meeting.
Is Draghi ready to batter euro longs again?
