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Draghi has certainly more in its hat
The European central bank meeting is giving a good dose of stress to the Swiss National Bank and Riksbank.

The move in the Swiss franc has been the major event in the foreign exchange market last Friday. The EURSEK took a five-figure dive to 9.2158 this morning. Central banks are certainly behind the scene before the Dec 3rd ECB meeting. Given that the ECB is expected to expand its QE program and also cut the deposit rates into deeper negative territory, Riksbank and the SNB seem willing to play proactively to prevent an undesired appreciation in the krona and the franc.

The fact that the SNB and Riksbank acted one after the other, hints at a potentially major action from the ECB. The last time the Swiss National Bank had proactively cut its rates into negative territories, the ECB had followed with the launch of the Quantitative Easing Program. We shall now hear some more whistles in the headwinds from Sweden and Switzerland.

The level of pre-ECB stress suggests that the European Central Bank may have more in its hat.

The market expects a 20-to-40 basis point cut from the ECB and an expansion of monthly bond purchases from 60 to 75 billion euros. Given that the ultra-dovish expectations are already priced in, the euro could well appreciate should the ECB fail to satisfy the market appetite for more cash. The market may have gotten well beyond itself given that the expectations for the rate cut has deepened from a 10 basis points to 20-40bp cut presently. In this sense, the ECB may have been trapped in its credibility and may simply be forced to jump as high as the hurdle.

The question is, how dovish could Draghi go to avoid a EUR appreciation?