If Draghi’s optimism on economy outlook is fading, sell EUR/USD?

In ECB’s press conference in Frankfurt later tonight, Draghi will have the chance to restate his case for a prudent approach towards ending bond purchases while reaffirming the positive outlook for the region’s economy. The key focus for FX traders tonight: ECB’s assessment on trade war, euro outlook, and inflation prospective.

• We don’t expect the Draghi to have any changes to either his language or policy until June. However, we need to watch whether Draghi would send the message that he is willing to wait until July. If that happens, euro could see a sharp sell-off after that.

• A string of disappointing economic data in recent weeks has brought fears that the eurozone boom and the growth momentum may already be fading.

• ECB’s Draghi could acknowledge the moderation of economic indicators amid potential trade war between the two biggest economy in the world.

• After a strong 2017, the single currency stayed on an upward path against the dollar in the first months of the year, some companies in the eurozone are complaining about the euro’s gain of above 10% last year.

• Overall, we think the outcome of the ECB’s meeting tonight might add further downward pressure on euro which would also give US dollar a firm lift.