​ECB meeting preview: will Christine Lagarde provide another boost?

When and where?

The forthcoming European Central Bank (ECB) meeting of 2020 will take place at their Frankfurt headquarters on Thursday 30 April.

Will the ECB ease again?

Much like their global counterparts, the ECB have been extremely accommodative throughout this crisis, with the committee raising quantitative easing (QE), liquidity and a €750 billion Pandemic Emergency Purchase Programme (PEPP).

With central banks willing to implement new measures at the drop of a hat, there are many who question why they need to act at this meeting rather than simply adjust their policies if and when the economic/market conditions dictate.

There will certainly be a significant element of retrospection over just how useful their previous actions have been. With mainland Europe seeing a reversal in daily deaths associated with the coronavirus, we are approaching a period of easing lockdowns.

With that in mind, there is a strong chance that we could see the ECB hold off this time around. Instead, there is likely to be a significant forward guidance element to this meeting, with ECB president Christine Lagarde likely to have her ‘whatever it takes' moment.

Her complaint that the EU action could come ‘too little, too late’ does highlight the somewhat powerless feeling at the ECB. Lagarde took control of an ECB with monthly QE and rock-bottom rates already in place.

Therefore, the focus is likely to be on the EU, with the recent short-term rescue package agreement, they remain unable to agree upon an economic recovery plan due to differences over the sharing of debt.

Where now for the euro?

EUR/USD has been on the rise today, with the rally taking us back into Wednesday’s peak of $1.0885. That coincides with the 61.8% Fibonacci retracement level around $1.089.

Given the wider trend of lower highs seen since the March high, there is a strong chance that the current move is a retracement of the decline from $1.0991.

As such, another move lower looks likely before long, with a break through the $1.0991 level required to bring about a wider bullish outlook. Until then, there is a good chance we start to see the pair turn lower from either the 61.8% or 76.4% Fibonacci level.

With respect to the meeting, the huge growth in the Federal Reserve balance sheet could see some attraction towards EUR/USD if people focus on a more patient approach from the ECB.

However, until that wider creation of lower highs comes to an end, there is still a good chance we see the pair turn lower to continue the trend of recent months.