ECB Preview: A Wording Change Could Make the Euro a Big Winner

Updated on
  • Analysts see tweak to forward guidance or staff projections
  • ECB may confirm a ‘gradual shift in policy outlook’: SocGen

With the euro having snapped a three-month rally in February, the European Central Bank may not allude to currency strength when it meets Thursday. Policy makers may instead be content with tweaking their forward guidance, analysts say.

Recent news events, including an anti-establishment surge in Italy, underpin the argument for policy makers led by President Mario Draghi to avoid any sudden moves. Still, surprises could still come in the form of fresh quarterly projections from ECB staff economists.

“If we get a slight language tweak on Thursday and a drop in average hourly wage growth in the U.S., we’ll be above $1.25 by the weekend,” said Kit Juckes, a strategist at Societe Generale SA.

The euro weakened 1.8 percent against the dollar in February, halting a three-month rally during which it surged more than 6 percent. The shared currency rose 0.1 percent to $1.2414 as of 2:44 p.m. in London Wednesday.

Here is a selection of analysts’ views on bonds and the euro ahead of the meeting:

Barclays Plc

  • Changes to forward guidance are coming but in “small doses,” strategist Cagdas Aksu writes in a note
  • Sees ECB dropping the asymmetric forward guidance in QE first, coming as early as this week

Societe Generale SA

  • The meeting should confirm a gradual shift in the policy outlook, loosening forward guidance slightly, according to strategists including Jorge Garayo
  • Remain bearish on euro rates, with the belly of the curve having further room to re-price

Morgan Stanley

  • Investors should remain neutral on duration into packed calendar of central bank meetings beginning with ECB, write strategists including Matthew Hornbach
  • Recommend keeping long Sep-19 Euribor position, but taking off the short 10y on 2s10s30s Bund or swap fly for now 

NatWest Markets

  • Minor alterations are in the cards for forward guidance, but base case is for no change, according to analysts including Anna Tokar
  • “It appears there is little reason to disrupt the markets at the moment, when the ECB views the current pricing as fair”
  • See Draghi making further mention of the strong euro in the question and answer session


  • “Any adjustment to the forward guidance will have a minimal impact given the market has already accepted the fact that the program will be wound down between end-September and December this year,” said strategist Matthew Cairns
  • “The material lack of wage growth and still-low inflation expectations will serve to keep a lid on a sustained, significant rise in yields”
(Updates with current pricing in fourth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE