According to the consensus expectations, the ECB is ready to administer another shot of stimulating measures to the weakening European economy. The is likely to cut interest rate and extend its bond-buying program. These measures usually produce a effect of currencies as they lead to a reduced return on the assets denominated in such currency.
However, this time may be different as euro retains potential in case Mario Draghi and Co fails to impress the market with something truly nuclear. Moreover, if investors sense that the ECB has not been bold enough, the initial market reaction may be brutal with EUR/USD moving above $1.11 in a matter of minutes.
This scenario is confirmed by the developments on the options markets, where traders are pricing in 0.15% cut in deposit rate and a relaunch of the central bank’s asset-purchasing program.