ECB Meeting today - Euro Update

While today's ECB meeting (1245 GMT) is unlikely to see a lift in the reference rate from 3.25%, markets continue to price a more aggressive tightening scenario heading into next year. Indeed, though no economists polled by Bloomberg expect a rate rise today, the general market consensus is for a stronger policy statement and press conference signalling further tightening ahead.

We agree, expecting today's policy statement and subsequent Trichet press conference (1330 GMT) to re-emphasise his policy "vigilance" with respect to rising inflation. However with euribor implied yields still hovering around 3.7%, we question such comments' ability to lift the euro.