It is going to be more about staying on the sidelines for Lagarde & co.
After the "recalibration" in December, the ECB is going to adopt a more 'wait and see' approach in the coming months as they await more key developments to play out before signaling any interest to change their policy stance later in the year.
As such, don't expect much fireworks - if any - to come from the meeting decision and Lagarde's press conference later today. Among the things they will be watching are:
1. Virus developments in the euro area
Lockdown measures look set to be extended in most countries, with Germany already announcing that they will at least keep tighter restrictions until the middle of February.
The impact of that on the economy will be the thing that the ECB will be mindful about and they will only get a sense of that once there is more data to flow through later on in Q1 or perhaps in Q2 this year.
2. Vaccine rollout progress
Alongside the virus situation, the ECB has to weigh how much optimism from the vaccine rollout is justified and how smoothly that will play out in gauging the outlook for 2H 2021.
If things do progress in a swift manner, they could afford to stay on the sidelines for longer and be given more flexibility in managing policy expectations in the coming months.
3. Inflation pressures
One of the key things that Lagarde may make mention today is how much/little attention the ECB will be paying towards any potential temporary rise in inflation later this year.
I would argue that she would adopt a similar stance as what Powell outlined last week, in that the ECB will brush aside any likely temporary jump in inflation readings this year until there is more clarity that such pressures can be sustained in the long run.
As such, this is one area that will also keep the ECB more guarded and preferably having to respond when only necessary but not before it happens.
4. Euro exchange rate
The recent pause in the euro appreciation will be welcome news for the ECB but EUR/USD is still largely sitting in a comfortable range above 1.20 for the time being.
I would expect some trivial remarks about policymakers watching any advance in the euro rather closely but besides any potential verbal intervention, there shouldn't be much else to it as long as the euro doesn't rise too far, too fast.
Conclusion
Given the above narratives still playing out, the ECB meeting will likely be a non-event today. However, some pressure on EUR/GBP could still see the euro move around on any quibble that could mess with positioning as the technicals are stretched.
Adding to that, Lagarde may also have to address the Bloomberg report earlier this week on the ECB intervening to limit the yields spread in the bond market. That will perhaps the more interesting issue to look forward to in the press conference later today.
