Does Draghi have a joker up his sleeve? Many analysts and commentators think that Draghi’s eagerly awaited Jackson Hole speech is the key of the two later today. While it seems unlikely that he will force the ECB’s hand and use the opportunity to announce the end of QE and lay out a full tapering schedule, there still is some event risk. Both the minutes to the July meeting, as well as comments from ECB council member Hansson suggest that policy makers are eager to increase flexibility going ahead and want to shift the focus away from monthly asset purchase volumes and indeed the APP (asset purchase plan) altogether. Details of the new communication framework, if one can call it that, are still to be discussed, but Draghi could still signal a paradigm shift and market reaction will largely depend on whether he will be able to once again manage to focus attention on the dovish parts of the next message. Monetary policy will remain accommodative, but with growth continuing to strengthen, additional stimulus will almost certainly be phased out next year.
EURUSD breached 1.1900 earlier this month and has since reversed to 1.1800, but it’s been a good summer for the common currency. Mrs. Yellen speaks within the hour at 14:00 GMT, with Mr. Draghi to the podium five hours later at 19:00 GMT.
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