The European Central Bank is not expected to change its policy at the April 2017 meeting. Nevertheless, the ECB always moves markets and this event will not be different. The key is the tone in Mario Draghi’s press conference. And the main yet unspoken driver of optimism is the result in the first round of the French elections.

Dovish Draghi or some spring happiness? Here is the preview with three scenarios.

ECB Background

Back in the March meeting, the Frankfurt-based institution removed an important clause from the statement. They omitted the phrase “use all instruments” regarding battling deflation. Draghi then clarified that there is no “sense of urgency” and sent the euro higher.

Later on, Draghi re-clarified his comments and said it only refers to the tail risks: the most extreme cases. Also, he reiterated that monetary policy will stay accommodative for a long period of time, weighing on the value of the common currency.

Other Governing Council members offered contradicting views. Some see a need for ongoing stimulus while others want to see the end of QE at the end of the year.

What’s at stake? QE tapering and the negative rate

The current QE program consists of buying 60€ billion worth of government and corporate bonds every month since April. The volume was reduced from 80€ billion in an announcement made back in December.

The program runs through the end of the year and the question is: what’s next? An extension of the current scheme? A gradual reduction, aka tapering? Or an abrupt end?

There are also questions about the negative deposit rate, currently at -0.40%. It is hard to see it falling below this level. But when will the ECB begin “normalizing it”?

What the ECB considers – lots of politics

The favorable outcome of the French elections undoubtedly plays a role in the ECB’s mood. While they may find it hard to admit it publicly, Macron’s high chances of becoming the next French president could stir the members towards an optimistic mood.