After a barrage of media trial balloons (as recently as today) meant to temper the enthusiasm of Euro bulls now that the EURUSD is back to 1.20 and threatening European corporate profitability, Mario Draghi’s Sintra hawkishness is a distant memory.

And so, with the ECB’s policy decision only hours from now, a “trapped” Mario Draghi finds himself in a quandary: with less than 4 months left until the formal expiration of the ECB’s €2.3 trillion QE program, he will likely start laying the groundwork for the central bank’s stimulus reduction – after all the ECB is rapidly running out of bonds to purchase – but without revealing too much as that will send the EUR surging, and he will also hold off on any major commitment, as an explicit backing off his recent hawkishness could collapse the EUR and send Bunds right back into NIRPatory.

Which path will he take?

With that in mind, courtesy of RanSquawk, here is a full preview of what to expect (or not) from the ECB president tomorrow.

Rate Decision due at 1245BST/0645CDT and Press Conference at 1330BST/0730CDT

  • All rates and the current pace of asset purchases are expected to be left unchanged
  • Staff will update macroeconomic projections; impact of EUR likely to weigh on inflation outlook
  • Key focus for press conference will be on recent EUR strength and possible QE exit
  • Click here for a link to an overview of ECB rhetoric since the last meeting

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    RATE/ASSET PURCHASE EXPECTATIONS

  • DEPOSIT RATE: Forecast to remain unchanged at -0.40%. The rate was last adjusted in March 2016, when it was cut by 10bps.
  • REFI RATE: Forecast to remain unchanged at 0.00%. The rate was last adjusted in March 2016, when it was cut by 5bps.
  • MARGINAL RATE: Forecast to remain unchanged at 0.25%. The rate was last adjusted in March 2016, when it was cut by 5bps.
  • ASSET PURCHASES: Forecast to maintain the pace of asset purchases at EUR 60bln per month until December 2017. Last December, the ECB reduced the size of purchases by EUR 20bln per month, and extended the purchase horizon by nine months.
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