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The Forex world is always struck by undulations unlike any other and this has again come true with the European Central Bank’s (ECB) announcement of its monetary policy. It’s not like a monetary policy is all that matters, but sometimes it can make a lot of difference.

The Forex world is always struck by undulations unlike any other and this has again come true with the European Central Bank’s (ECB) announcement of its monetary policy. It’s not like a monetary policy is all that matters, but sometimes it can make a lot of difference. The economic calendar and in turn the Forex calendar seems to be dotted with anticipation with this announcement having made its presence felt. It is presumed that the European Central Bank has perhaps had a lot of persistence in terms of disinflation. However, things have changed as of now and it seems to be finally prepared to run a check and perhaps do something about the slide in terms of price growth. After all, price is not just any issue and it needs to be dealt with in the right manner.

Moreover, there are consensus forecasts which have put up the forecast that main policy rate has come down and that too to a record low. It is said that this low has even scaled the 0.10 percent mark. At the same point of time, it can be seen that the European Central Bank has been paying the banks so that they keep the money in their deposit facility. This is again seen in a different light. Most are of the opinion that things are going into a kind of negative territory and that would stand at something like 0.10 percent.

In fact, if you take a look at the recent past, then most facts should loom rather clear. The Eurozone has been suffering from steady disinflation since about 2011 itself. This is one trend that the European Central Bank had been desperately trying to push back. This was mostly an attempt against the trend seen last November. As a result, the policy rates had been slashed by 25 basis points, which is literally half of what it used to be.

However, it remained a matter of concern at the end of the day, for this move proved actually ineffective. Reports suggest that Mario Draghi and company have made a lot of attempts and finally managed to mull over a long enough menu, which is all about policy alternatives. These would be effectively aimed towards pushing the banks. Now interestingly enough, these banks happen to be among those whose borrowing costs reflect a different story altogether. They have already tended to trail the official rate set by the European Central Bank in recent years. It has been mostly about passing on the savings to the broader economy.

Now, with such a situation in the backdrop, a range of scenarios reared their heads. In case of a stimulus delivered beyond a move, so much so that it broaches negative territory as far as the deposit rate is concerned, then it is likely to make the Euro go lower and even lower. These forecasts might see an outcome after all and this might just be in line with the initial downward pressure that had been applied. This situation has another possibility and that includes a follow through and it could be limited considering how much the investors have already priced it in. This could also lead to a relief tally. After all, the surface is bubbling with hopes of bolder action and something more concrete.

Here the situation is something quite delicate in a way. This means anything that would be less than a negative deposit rate, and that too inclusive of the conventional interest rate cuts, is most likely going to be seen as something quite hawkish. This would in turn have its own effect and it would send the common unit spiraling higher.

On the other hand looms large the Bank of England, which is expected to deliver its monthly policy announcement. It is due almost any time. Now the crux remains the outcome and this might again amount to something inconsequential as far as the British Pound is concerned. Ever since the May sit down, inflation has almost remained anemic and as a result the economic news from the UK front has been stable so far. This is of course relative to the expectations that have gathered since May. There is of course the hint that the central bank isn’t anywhere near to seeing the drawdown that has been inflicted on the store capacity, such that it would be an immediate prompt to rethink the accommodative posture.

There is a lot happening and a lot expectations bubbling just beneath the surface. With this it could be seen that the New Zealand dollar had outperformed and that too in the span of a night. Then there is the Japanese Yen that advanced a move lower as far as the Nikkei stock index is concerned. Yes a lot is happening, now it is to be seen where it might lead eventually.

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