EUR: Will the ECB comment on the euro? - ING

The ECB announces monetary policy today and is widely expected to keep rates on hold. Trade and the euro's strength are the two hot topics in Frankfurt today. A few reports suggest that a US-EU deal is imminent and should follow the Japanese blueprint announced yesterday, so 15% tariffs on EU exports, ING's FX analyst Francesco Pesole notes.

Modest downside risks for the euro

"If the ECB is feeling confident that a trade deal is coming, the risks of a dovish surprise are indeed lower. However, the currency discussion remains a wildcard that poses downside risks for the euro. A few members have been unusually vocal about the euro's strength, and there is a chance some FX comments can make their way into today's communication. After all, the ECB has been focused on the theme of inflation undershooting, and a strong domestic currency does contribute to that. It remains to be seen whether the ECB feels currency remarks might hinder US-EU trade relations, considering Trump's sensitivity to FX manipulation themes."

"In terms of guidance, don't expect anything new from the ECB, which should limit the market impact of today's meeting. Policymakers have reiterated that monetary policy is in a 'good place' given subdued inflation, but the Governing Council is probably happy with markets pricing in just one cut by year-end."

"We think there are still some modest downside risks for the euro today, but if the ECB steers away from commenting on the euro's strength, keeps guidance unchanged, and markets feel even less chance of a September move, EUR/USD could break above 1.180."