The European Central Bank is going to hold a meeting about the continuation of European monetary policy this upcoming Thursday, but what can we expect? I'm not only asking this question regarding some personal holdings in European stocks, but also because I have some FX plays in mind. The EUR/USD pair is incredibly low at this point, and like many traders holding this pair, including myself, I wonder how low it can go. A big factor is this upcoming ECB meeting. Andrew Bosomworth of PIMCO wrote in a sneak preview that the economic problem in the EU stems from the fact that the inflation is far too low, and that it has been too low for years. The prediction of the ECB that we will reach an inflation point of 1.7% is simply not feasible, and that they're more leaning towards 1.3%. This specialist believes that significant steps necessary to increase those inflation expectations, otherwise there'll be likely a scenario as we see today in Japan. He emphasizes that it's the reason why extra stimulation packages are needed to boost the economy in Europe. That's because market players are more likely to adjust their inflation expectations when there are big changes in the market.

READ MORE »