The European Central Bank (ECB) may generate a limited market reaction as President Mario Draghi and Co. are widely expected to retain the current policy, but the fresh batch of central bank rhetoric may spark near-term headwinds for the Euro should the Governing Council show a greater willingness to further extend its easing-cycle.

What’s Expected:

Why Is This Event Important: Even though the ECB is on course to reduce its its asset-purchases to EUR 60B/month starting in April, the Governing Council may continue to strike a dovish outlook for monetary policy as officials argue ‘headline inflation had increased recently, mainly owing to developments in energy prices.’ In turn, the central bank may increase its efforts to thwart a ‘taper tantrum’ and utilize the non-standard measures beyond December 2017 amid the ongoing weakness in underlying inflation.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (JAN)

0.3%

-0.1%

Consumer Price Index Core (YoY) (FEB A)

0.9%

0.9%

Gross Domestic Product s.a. (YoY) (4Q P)

1.8%

1.7%

The ongoing slack in the real economy accompanied by the slowdown in private-sector consumption may push the ECB to further support the monetary union, and the single currency stands at risk of facing additional headwinds in 2017 as the central bank struggles to achieve its one and only mandate for price stability.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Sentix Investor Confidence (MAR)

18.5

20.7

Producer Price Index (YoY) (JAN)

3.2%

3.5%

M3 Money Supply (YoY) (NOV)

4.4%

4.8%