Next week, the European Central Bank (ECB) will have its policy meeting. According to ING analysts, the meeting will be uneventful, unlikely to shake the EUR/USD tight range. They see the pair with a neutral bias for next week, trading in the 1.1060/1.1200 range.
“The European Central Bank meeting (Thursday) should be a non-event. No new economic projections are published and the board’s risk assessment is unlikely to change compared to the December outlook. While the ECB’s strategic review is set to begin soon, it won’t be completed until year-end and in the meantime, the narrative is unlikely to change. Hence, a fairly limited impact on the euro stemming from this meeting. As for the January eurozone PMI (Friday), our economists look for a modest improvement, though the Manufacturing PMI should remain in contractionary territory. Still, stabilising / modestly improving eurozone PMIs fit the current ECB outlook for stability and hopes for a rebound. This, in turn, underscores the fact that there is no need for an imminent change in the policy stance. With no ECB policy normalisation on the horizon any time soon, EUR upside appears to be off the table.”
“In the US, it is a fairly quiet day on the data front. December US Existing home sales (Wednesday) should not materially change the dollar’s prospects. Rising speculation about possible US tax cuts might be seen as marginally positive for the US dollar vs the low-yielding euro, as it would benefit the dollar via (a) the improved growth channel, and (b) further reduce the odds of a Federal Reserve rate cut this year (which is still almost fully priced in).”
“As for next week, expect EUR/USD to remain in a tight range, as has been the case for the past few weeks.”