Before we talk about the three different possible scenarios, it is important to look at the economic dashboard for the euro-zone. The chart below shows that the overall health of the eurozone—despite the recent bazooka from the ECB—is still deteriorating. This simply means that the ECB is likely to remain dovish in terms of its monetary policy. The status quo will remain in place until and unless we start to see some improvement in the German headlines.
The three possible scenarios we can see today are
- The Dovish ECB
- The Hawkish ECB
- The Neutral ECB
We are anticipating that the ECB meeting is going to be lackluster—meaning–expect no further actions.
The Dovish ECB
After announcing more rate cuts during the last meeting, it is highly unlikely for the ECB to announce anything new today. Perhaps, we may just hear something more about the composition of their purchase. But it is important to hear the ECB’s thought about the ongoing health of the Eurozone’s data—clearly deteriorating. This could push the ECB to keep the tone more dovish and continue to show its support. The net result could result in a lower euro.
The ECB’s support would be a positive sign for the equity, a typical textbook trade, and this would push the DAX higher.
The Hawkish ECB
It is highly unlikely for the ECB to be hawkish given the state of the economic data. However, this is the last meeting of the ECB president and he is free to point fingers. Hence, he could say that it is time for the fiscal policies to play their part and the central bank is pretty much done in pushing the markets higher. The immediate effect for the euro could be a move to the upside because no more rate cuts and the DAX index could move lower because of no more help from the ECB. We already know that the fiscal policies aren’t going to be in motion at any time. Germany is the country that needs to lead the game here and it is in no mood of doing this.
The Neutral ECB
The ECB gives us nothing and the meeting turns out to be purely about Draghi’s legacy. The DAX index is likely to continue its uptrend and the euro may not be able to score more gains because the threat of more rate cut stays on the table. 
