*ECB policymakers likely to align with Fed stance of average inflation targeting.:
* EURUSD likely to be in a range of 1.1750 – 1.1900 in coming days.:
Today in FX space the centre of attraction would be European Central Bank monetary policy. We think euro move now will depend upon how the policymakers will justify the higher euro. Albeit the ECB now has an inflation credibility problem with market-based EUR inflation breakevens diverging away from their equivalent in the US and UK. As such, there is pressure on the ECB to restore some policy credibility. We think ECB may sound dovish but not enough to flip euro rally.
However, given the Fed’s relatively dovish shift with the introduction of AITat Jackson Hole the ECB may also be cornered into acting now and similarly adding the word “average” in the context of inflation to their rates forward guidance in the statement. There is also a good chance we see the ECB emphasize that policy rates will remain low for a very long time.
Any surprise stimulus which is least expected would be the most effective way to move the EUR lower. However, more QE is not unanimously popular so it may be a tough sell for the more dovish ECB policy members or those particularly concerned about the effects of a strong EUR. Admittedly the ECB has struggled to talk EZ rates lower at the last two meetings. Overall we think EURUSD would be in range of 1.1750 to 1.1900 after the policy.
TREND : WEAK BULLISH
Time : 10/09/2020
Pivot : 1.1803
Technical View : LONG ABOVE 1.1823
Target : 1.1843, 1.1869, 1.1891, 1.1941
Technical View : SHORT BELOW 1.1783
Target : 1.1763, 1.1716, 1.1685