LONDON (Reuters) – The ECB meets on Thursday against a backdrop of concern about a global trade spat and a softening in euro zone economic data that could potentially hamper the central bank’s plans to unwind its extraordinary monetary stimulus.
In March, the European Central Bank dropped a long-standing pledge to increase its bond buying if needed, taking another small step in weaning the euro zone economy off protracted quantitative easing (QE).
Just how much recent economic and international developments are impacting the ECB’s plans to unwind QE could well make for a lively debate. Here are some of the key questions on the radar for markets.
1/ Will there be changes to forward guidance?
Probably not. Having taken another baby step last month towards unwinding the 2.55 trillion euro ($3.15 trillion) asset purchase scheme, the ECB is not expected to make any changes to its policy outlook on Thursday.
Still, discussions to future tweaks to the so-called forward guidance, which includes the ECB’s outlook on asset purchases and interest rates, could be on the agenda. The ECB is seen on track to wind up QE by year-end.
“It’s in the ECB’s interest to say and do nothing,” said Pictet Wealth Management economist Frederik Ducrozet. “We know communication changes are coming but the risk-reward is in favor of waiting until June or later before announcing next steps.”
The ECB’s QE program: EUR=.
Analysts are divided about the impact a more serious escalation in tit-for-tat trade wars would have on the currency. German exporters could be hit hard but given the dispute so far is largely between Washington and Beijing any negative impact on two of the euro zone’s biggest trading partners would more likely hurt the dollar and yuan, boosting the euro.
Euro strength: cause for concern?: reut.rs/2HLjt34
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