This is the last policy announcement from the ECB before President Mario Draghi makes way for his replacement Christine Lagarde on November 1st. As a result, there is unlikely to be much change at the policy meeting since Draghi will want to give a stable playing field to Lagarde for when she takes over.

However, with that being said, the latest PMIs out this morning for the Eurozone showed that the overall picture is still one of a weak economy. The Composite PMI was nearly unchanged at 50.2 vs 50.1 prior and the manufacturing PMI was 45.7 vs 45.7 prior with new orders continuing to fall. The service PMI data holds the GDP growth in positive territory with a 51.8 reading above the 51.6 prior print. The question remains, ‘but for how long?’ Key areas to look for in the meeting are:

  1. Any change in asset purchases: Currently €20bn per month since November 01
  2. Any changes in inflation target: ECB’s inflation calculation set to be reviewed shortly
  3. Tiered rates: Little change expected, but could be one to watch
  4. Press conference: Watch for questions to Draghi on the ECB’s QE program

The EURUSD pair has been supported by a weak dollar. Positive risk sentiment has led to USD flows into riskier currencies and the EURUSD has benefitted from these moves alongside upside in GBPUSD on Brexit optimism. There is a large option expiry at 1.1000-10 on EURUSD which will be a key support area to watch heading into the ECB rate meeting.