With a test of the 1.30 area likely, according to Danske. Danske says while a refi-rate cut can't be ruled out, it's the deposit rate that matters for the FX market as it's this that determines the level of EONIA, and Danske says ECB is a long way from going negative. Coupled with stretched EUR short positioning , Danske says overall scenario is EUR positive. However with the longer-end of the EONIA swaps having sold off in May, there could be room for the FX-sensitive part of the curve to move lower. That, along with Draghi likely taking a soft approach and offering no grand ABS programme should push EUR/USD trade lower in response to the meeting. EUR/USD at 1.3126.
(gary.stride@dowjones.com)
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