• Home
  • Pro
  • Partners
  • Help and support
  • English (UK)
Pepperstone logo
Pepperstone logo
  • Ways to trade
    • Spread betting

      Bet on global price movements in £ per point

    • CFD trading

      Trade on 1000s of assets without owning them

    • Pricing

      Discover our tight spreads, plus all other possible fees

    • Risk management
    • Trading accounts
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
  • Markets
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Indices

      Enjoy 24-hour pricing on the UK100, US30 and more

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Shares
    • ETFs
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
  • Trading platforms
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
  • Market analysis
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

  • About us
    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
    • Spread betting

      Bet on global price movements in £ per point

    • CFD trading

      Trade on 1000s of assets without owning them

    • Pricing

      Discover our tight spreads, plus all other possible fees

    • Risk management
    • Trading accounts
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Indices

      Enjoy 24-hour pricing on the UK100, US30 and more

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Shares
    • ETFs
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
EUR

ECB meeting preview: Setting up for more measures

25 Oct 2020
Share
No new policy action is anticipated by markets at Thursday’s ECB meeting.

However, with the economy deteriorating amid rising Covid-19 cases across the region, President Lagarde is expected to set the stage for the next wave of stimulus, when it releases its latest staff forecasts in December.

Cast our minds back to the ECB’s meeting in September and it seemed the discord between the two opposing camps of hawks and doves had reopened, after the not-so-new President had managed to heal this issue. We’ve also seen in recent weeks that Governing Council members have been voicing different opinions around the need for additional policy stimulus.

Clash between Hawks and Doves

The hawkish camp led by Mersch and Weidmann believe deflationary pressures are transitory and should recede next year, with plenty of time and space left in the current toolbox. Further stimulus may in fact adversely impact and so doesn’t justify more easing. The doves on the other hand, notably Panetta and Cos, argue that more needs to be done to support the economy as the chance of deflationary pressures is increasing. They think that now is not the time to be complacent as risks are unbalanced. For good order, the centre ground is occupied by Lagarde, Lane and de Guindos with the latter recently laying out the bank’s reaction function for future bond buying.

As always, some sort of compromise will be struck as President Lagarde attempts to reign in both camps. However, certainly a cloudier picture of the bloc’s economy has emerged since the last meeting in September which may put the doves in pole position.

Double dip?

Increasing restrictive measures, regional lockdowns and infection rates are hitting several countries very hard. Inflation has fallen short of the ECB’s projections this quarter, even allowing for the German VAT cut and lower energy prices, with the core touching the lowest rate on record. Market-implied inflation expectations have also fallen, and the September GDP forecast of final quarter growth of 3.1% now looks wildly overconfident.

ECB members will be paying close attention to consumer prices over the coming weeks, with the trend for softening core inflation being very painful for policymakers and a definite potential trigger for more loosening. Currency strength is also an issue but may be less pressing at this meeting as the effective euro appreciation has abated as economic worries on the eurozone have returned.

So, while the pressure for further easing has increased, it seems more likely that the Governing Council will wait for their December forecasts to measure the next policy response. Indeed, more than half of its €1350 billion pandemic emergency purchase programme (PEPP) remains unused and this is due to remain until at least the end of June 2021. This means dovish signals like a faster pace of purchases or extension over a longer period might be seen this week, which would probably be enough to avoid disappointing markets. Further out, a rate cut may be on the table if the situation is seen as more than temporary, although the effectiveness of this is questionable with the current deposit rate at -50bp.

Market implications.

With bond yields continuing to fall and spreads narrowing recently, an easy way for the ECB to signal more easing is on its way would be to increase the pace of purchases. But with a dovish tone already expected, President Lagarde may have to go further to bring down EUR/USD from its current levels. The global picture has been the key factor in the pair’s recent moves, and technically after recent sideways trading, the 61.8% Fib retrace of last month’s drop at 1.1859 may be the pivot for a move to 1.20 if the ECB does frustrate those doves. Support lies at the mid-October levels around 1.17.


Related articles

Could the US election prove to be a huge USD positive?

Could the US election prove to be a huge USD positive?

US
USD
Gold outlook bullish ahead of US election

Gold outlook bullish ahead of US election

Gold

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our online application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other Sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indicies
  • Commodities
  • Currency indicies
  • CFD forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Meet Our Analysts

Learn to trade

  • Trading guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
+448000465473+442038074724
70 Gracechurch St
London EC3V 0HR
United Kingdom
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Sitemap

© 2025 Pepperstone Limited 
Company Number 08965105 | Financial Conduct Authority Firm Registration Number 684312

Risk warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.7% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Trading derivatives is risky. It isn't suitable for everyone and, in the case of Professional clients, you could lose substantially more than your initial investment. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your or your client's personal objectives, financial circumstances, or needs. Please read our legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

Pepperstone Limited is a limited company registered in England & Wales under Company Number 08965105 and is authorised and regulated by the Financial Conduct Authority (Registration Number 684312). Registered office: 70 Gracechurch Street, London EC3V 0HR, United Kingdom.

The information on this site is not intended for residents of Belgium or the United States, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.