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Weekly preview - The ECB expectations paradox
Even with very important US events, the ECB policy meeting will be crucial for Euro/dollar direction this week. Bank President Draghi wants to surprise markets with a bold and aggressive decision which triggers a decisive shift in expectations and breaks any risk of a deflationary spiral. After last week's leaks, however, markets are now expecting a surprise which has already had the effect of pushing short-term rates lower while the Euro has weakened further. There will, therefore, need to be an even more aggressive ECB move to restore a surprise element but this again will tend to be priced in ahead of the event. ... (full story)