- IMF Managing Director Christine Lagarde
The most traded currency pair is likely to stay lower in the first half of the weak ahead of the ECB's meeting, while the U.S. currency found backing in its safe-haven appeal amid growing tensions in Ukraine. Nevertheless, the single currency is unlikely to drop significantly after the central bank's press conference on Thursday, as only 25% analysts responded by Bloomberg expect the ECB to reduce its key refinancing rate from the record-low of 0.25%. Even so, Mario Draghi claimed the central bank ready to tackle risks from persistently low inflation and other internal and external problems.
Last Friday's CPI report and manufacturing output at 53.2 in February are likely to abandon markets' expectations of an interest rate cut, even despite the fact manufacturing PMI surprised markets to the downside. Consumer prices at 0.8% eased some of the pressure on the ECB that already said there are no deflation risks in the region. Positive figures, however, should be treated carefully, as according to Christine Lagarde, a period of prolonged subdued inflation is likely to undermine the region's recovery. The IMF sees a 15-20% risk that long period of inflation below the official level will de-anchor the expected anticipation by the Eurozone's consumers about the longer-term inflation. The ECB will most likely stay pat this week, however, monitoring and controlling inflation still is one of the central bank's key duties.
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