European Central Bank meeting preview, to bring on 'undesirable' EUR volatility'?

<p>Via a Commerzbank note previewing the European Central Bank meeting decision due on Thursday. </p><p>Analysts at the bank say that following the the ECB signalling a continuation of rate hikes for today's meeting at its previous meeting, "the ECB is likely to find it difficult to move to a less explicit forward guidance without the market initially seeing that as a dovish signal."</p><p>But Commerzobank says since that meeting signs have accumulated that the ECB too is no longer able to hike on autopilot:</p><ul><li>analysts point to signs of tighter credit conditions in the ECB's Bank Lending Survey published earlier this week</li><li>and renewed signs of an economic slowdown in Germany</li></ul><p>These, says Commerzbank, should soon dampen ECB interest rate optimism. Adds that the ECB is probably facing a bigger communication challenge than the Fed.</p><p>And concludes with this, which may (well, is) be good for FX traders:</p><ul><li>That also suggests a higher risk of it ‘going wrong’ – i.e. the increased likelihood of undesirable exchange rate volatility.</li></ul><p>ECB is at 1215 GMT (0815 US Eastern time) with European Central Bank President Lagarde's news conference following a half hour later. </p><p>—</p><p>Earlier:</p><ul><li><a href="https://www.forexlive.com/centralbank/european-centralbank-monetary-policy-meeting-preview-guidance-should-be-less-definitive-20230727/" target="_self" rel="follow">European Central Bank monetary policy meeting preview – guidance should be less definitive</a></li><li><a href="https://www.forexlive.com/centralbank/european-centralbank-policy-meeting-thursday-27-july-2023-preview-20230726/" target="_self" rel="follow">European Central Bank policy meeting Thursday, 27 July 2023 – preview </a></li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.