Today’s session will be marked by the European Central Bank Minimum Bid Rate decision which will be announced at 12:45 pm London time.
The interest rate for the main refinancing operations providing the volume liquidity to the banks has declined to all times low in October 2014 and remains unchanged at 0.05% since then.
The benchmark rate is expected to stay unmoved this time, as deflationary pressures due to the deflated oil price remain, among the others, a heavy toll on the inflation rate in Europe, which is well below 2% target.
Nevertheless, the story is different with the deposit interest rate, which first went negative in June 2014, when ECB adopted a -0.10% level, meaning that banks are now charged with keeping their funds with ECB. Since then further two rate cuts have taken the rate to -0.30%. This time, market participants are pricing in at least 0.1% decrease, with the interest rate, in this case, will be -0.4%.
Short term interest rates are playing a major role in a country’s currency valuation. Hence, a market volatility usually rises during the time of the release.
The importance of this announcement will be amplified by the ECB press conference held at 1:30 pm London time, where additional monetary easing measures are expected to be announced.
The Bank’s primary means to communicate to the investors, the press conference will usually cover factors that affected the current decision including the inflation pace and the overall economic outlook.
During the afternoon trading session, traders will be watching the US unemployment claims data, with the number of individuals who applied for the unemployment insurance during past week forecasted to improve to 272.000 down from 278.000 of the previous release.