Euro Exchange Rate Outlook for Today: EUR biased towards the upside with ECB meeting likely to raise levels of volatility

The euro (Currency:EUR) is broadly firmer on the foreign exchange markets ahead of today's ECB interest rate decision and press conference:

The euro dollar exchange rate is 0.22 pct up on Wednesday night's closing level at 1.3121.
The euro pound exchange rate is 0.04 pct higher at 0.8496.
The euro Australian dollar exchange rate is 0.72 pct higher at 1.3823.

(Please Note: The above are spot market quotes to which your bank will add a discretionary spread. However, an independent FX provider will guarantee to beat your bank's offer, thus delivering more currency. Please learn more here.)

Richard Driver at Caxton FX says currency market players will be watching for any dovish signals from ECB President Draghi; this would certainly be a euro-negative:

"Weak eurozone retail sales data reminded us that it’ll be a while until we can look at the eurozone economy with any real confidence. Still we expect the ECB to be confident enough with the recent upturn in German output not to cut interest rates for a second consecutive month today.

"As ever though, Draghi’s press conference will be watched closely for dovish signals of further monetary easing down the line. All in all, we expect this to be one of the less exciting ECB announcement days."

Chris Walker at Barclays says he sees today's meeting skewed towards being a negative for the single currency:

"The ECB is broadly expected to leave its main policy rates unchanged tomorrow, with just two of the 59 economists surveyed by Bloomberg expecting a 25bp cut. The focus should instead be on ECB President Mario Draghi’s statement.

"We see little scope for major policy developments and thus expect the EUR to stay in its narrow range.  Selectively selling EUR-cross shorter-dated volatility looks attractive.

"Although the EUR has largely been immune to surprises in data releases,  we expect two factors (alongside our core USD bullish view) to change this. First, relative rates should eventually drive EUR/USD lower. Second, the concept of negative rates provides Mr Draghi with a tool for verbal intervention."

Walker also tells clients that he remains of the opinion that the euro will start to weaken against the US dollar: "We don’t expect this sideways range in EUR/USD to prevail over the medium term. Principally this is because we expect USD appreciation to be the driving force of FX markets later this year."

UniCredit Bank tell their clients that they believe the Euro is biased towards the upside:

"The EUR-USD reaction to the ECB meeting result will also be influenced by the response of bond and stock markets, but in our view a rally above 1.3150 and towards 1.32 is more likely than a fall below 1.30."

Joshua Mahony at Alpari warns that volatility is likely to rise, he too sees the euro dollar exchange rate biased towards the upside:

"The euro-dollar continues to tread water around the 100 day moving average this morning off the back of two similar consecutive days. What is becoming increasingly clear is that given the volatility associated with today’s ECB rate decision, traders have been taking positions in anticipation.

"That doesn’t necessarily come in the form of a long or short position, but can also lead to the reduction of the number of positions held given the gravity of the ECB announcement and the volatility as exemplified by last month’s statement. I expect to see significantly higher volatility today, whereby the likely decision to keep rates steady will bring about a spike higher towards 1.315-1.32."