Forex Flash: EUR in focus as Draghi puts currency in perspective – UBS

Questions on the euro's current exchange rates aside, a key topic of Draghi's press conference today will be the recent LTRO repayments. According to Gareth Berry, a Research Analyst at UBS, “It is doubtful that the ECB will look upon the current numbers unfavorably, especially if it allows banks to show strength.”

Yet, “too much of a good thing might also be unwelcome: banks' bifurcation worries aside, if the pace of repayment does lead to higher forward EONIA and outright ECB tightening due to balance sheet shrinkage, the current positive link between short-rates and the euro will only strengthen. No one likely expects the ECB to talk down the currency, but inadvertently talking it up perhaps should also be avoided for now.” Berry adds.