EUR: Best left alone until after the ECB

The market has written in a reduced Refi rate, a negative Discount rate, and some extra LTRO-like measures into tonight’s ECB rate decision. My sources in Germany tell me that this is far from a foregone conclusion. Regional banks and insurers in Germany are complaining loudly, and Germany is always the loudest voice inside the ECB.

The lowered Refi rate is surely a given but it’s no certainty that the other two measures will be adopted at this time.

I think it’s best to leave the EUR alone until after the ECB decision. My sense is that sentiment is bearish and short-term positioning is ‘short’, so any disappointment in terms of measures will lead to a sharp stop-driven rally. On the other hand, the longer-term macro players will start selling heavily if the ECB turn more dovish than expected, leading to a sharp move lower.

Too much guess work in my view, sit back and wait for trading opportunities after the event.