My pick: Stay short euro-Aussie, short euro-dollar
Expertise: Fundamental and technical analysis with risk management
Average time frame of trades: A few hours to a few weeks
We look to the ECB’s May policy meeting as a filler before the June meeting, at which the ECB will make adjustments to its economic projections. The three-pronged development of higher core CPI, improved PMI surveys, and increased excess liquidity (which should lead to a drop in interbank lending rates) reduces any immediate need for substantive action, like the unveiling of QE. The ECB must now partake in a careful balancing act, as its dovish policy responses are limited even as Mario Draghi pays lip service to the hope for a weaker euro. Any euro breakouts on a lack of ECB action could be limited, as policymakers have displayed a poignant displeasure with euro-dollar whenever it trades above $1.3900.