The second day of August brings a number of news events which have demonstrated some history of moving the currency market in the past. Results of a Spanish auction of 10-year bonds, a Bank of England policy decision, and a US weekly jobless claims report will hit the news wires over a roughly four-hour span of time in the middle of the European trading day.
However, comments made during a speech at the Global Investment Conference in London last Thursday made that trio of events virtually irrelevant. All eyes will be on what's said by an Italian banker and economist in a conference room at the European Central Bank's Frankfurt headquarters starting at 8:30 a.m. New York time (12:30 GMT).
Thursday's ECB press conference (live webcast here) could be one of the most important in the central bank's history. As referenced previously in this post, market expectations of a major policy move by the eurozone's chief monetary guardian are quite high after remarks made by ECB president Mario Draghi in London on 26 July (Draghi's comments start at the 0:20 mark in the video below).
A recent CNBC survey suggests that markets expect the most likely path for the ECB will be to resume intervention in government bond markets.
Given Draghi's claim that the central bank will do "enough" to support Europe's single currency, doing nothing is not an option. Granting a banking license to the European Stability Mechanism (ESM) [so it can expand its capacity via the ECB] is seen by many as an ultimate solution, yet that path currently faces notable opposition from top German officials. Re-activation of the central bank's Securities Markets Programme (SMP) could certainly buy time for the eurozone's leaders, but might not match the market's present view of "enough." Besides, Germany's Bundesbank has recently reiterated its opposition to ECB bond buying.
According to 51 of 55 economists surveyed by Bloomberg News, the ECB will keep its benchmark interest rate at 0.75 percent. Four economists surveyed predict a cut to 0.5 percent. The rate decision will be announced at 7:45 a.m. New York time.