The attention of investors in today's European session is certainly focused on the European Central Bank (ECB) policy meeting which is widely expected to increase its quantitative easing tonight.
At a meeting last October, ECB President Christine Lagarde announced that the central bank would re-calibrate all available monetary policy tools to address the negative impact on the economy due to the coronavirus pandemic.
This has led the market to expect that the ECB will increase their emergency bond purchase (PEPP) program by € 500 billion and extend its implementation at least until the end of 2021.
In addition, the central bank may also offer very cheap long-term loans to other financial institutions.
So far, the ECB has refrained from showing optimism over the positive development of the vaccine following the worrying outbreak of the alarming Covid-19 epidemic in Europe resulting in uncertain short-term prospects.
Meanwhile, the appreciation of the euro may be a concern for the central bank even if they do not express it. However, the high value of the euro will definitely add to the pressure on inflation which has fallen to negative levels.
At the time of writing, the euro traded slightly lower by hovering around the price level of 1.20900 against the US dollar.
Tonight’s price movement may be somewhat limited as investors have learned in advance about the steps the ECB will take. However, investors need to be prepared to face any possibility from other factors that could interfere with market sentiment.
