Today’s ECB decision is expected to result in a 25bps cut in the main target rate to 3.50%, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Focus is on ECB guidance

“The key focus for markets will fall more onto guidance in the statement and President Lagarde’s press conference. Markets are pricing in another 38bps or so of easing in Q4 but it is not clear that the ECB will move rates lower as quickly as markets are currently expecting.”

“A cautious outlook for additional easing would suggest the ECB is comfortable sticking with its 25bps per quarter pace which may extend the EUR a little support.”

“Spot is tracking a little higher intraday but the overall tone for spot looks soft after yesterday’s failed rally and rejection of 1.1050+ levels. Support in the low 1.10s is holding but momentum is tilting risks towards a bit more softness and a test of supports in the high 1.09s.”