Speech by ECB Vice President de Guindos May Signal Future Monetary Policy Adjustments

Speech by ECB Vice President de Guindos May Signal Future Monetary Policy Adjustments.

At 08:10 GMT today, all eyes will be on the ECB as Vice President Luis de Guindos is to speak about what may hold his comments to influence tomorrow's Eurozone monetary policy. His statement will be essential since he is one of the most influential people on the ECB's choices and also for his declaration on some expectations of signals about policy tightening that the markets are bracing for potential signals regarding policy tightening.

Still, while it's unclear what exactly the Vice President is going to stake out, there's a good chance any veiled hint that the monetary authority would be on its way to tighten policy may prove to be a short-term gain for the euro. If de Guindos were to comment that the ECB intends to increase interest rates or tighten liquidity measures in the near term, the euro should rally against other major currencies. Such commentaries can also create market gossip about a stronger ECB stance for the subsequent meetings.

However, if his tone is dovish by urging continued monetary policy at the current stand-alone until the tide of economic uncertainties recedes, then the euro might face some selling pressure. This might prompt market operators to reassess what they expect from the rate hike, and hence, borrowing costs could remain lower for a longer time.

It will depend upon the tenor and details of de Guindos' speech to better determine more profound implications for the European economy. A more aggressive tone regarding controlling inflation would tend to suggest that the ECB is all set to crack down on rising inflation, which means tighter financial conditions are ahead. Any indication of patience and a need to support growth might indicate a more accommodating policy for a while. Ultimately, this speech may presage the ECB's next move, but details remain unclear. The euro and financial markets will hang in the balance as markets are likely to respond based on the perceived likelihood of tighter policy measures or continued economic support.