Barclays Capital discusses the outlook around the ECB meeting on Thursday and sees a high bar for a hawkish ECB surprise. On the EUR front, Barclays is not tactically bearish EUR/USD around the meeting, but sees overall downside risks further ahead.
"We expect the ECB staff macro projections to show a slight downward revision of near-term growth and an upward revision to headline inflation. We believe that the GC will discuss the options for tapering the net asset purchase program towards zero but only make such an announcement at the July meeting keen to see more data.
We think this may disappoint a segment of the market, given last week’s re-pricing. A taper announcement this week is a non-negligible risk, however, but the bar for a hawkish surprise is not low and sustained EUR gains would likely require a strong message by the ECB on growth and inflation trajectories too.
At current levels, we are not particularly bearish EUR on a tactical basis but still see risks around the common currency as skewed to the downside," Barclays argues.