Euro minefield - what markets will monitor at Thursday's ECB meeting

European Central Bank policymakers hold a widely anticipated meeting on Thursday, amid speculation the central bank wants to wind down its extraordinary bond-buying monetary stimulus soon. 

However, this year’s surge in the euro exchange rate complicates the ECB’s exit strategy. It curtails already sub-target inflation by making dollar-priced imports cheaper, dragging down the booming export sector and cutting into corporate earnings from outside the bloc. 

Any mention of the euro and its relative impact on financial and economic conditions, as a result, may be the biggest market mover on Thursday. 

Here’s what financial markets are looking for from the ECB’s statement and President Mario Draghi’s press conference. 

1. EURO STRENGTH 

The euro’s more than 13 percent rise against the dollar so far this year, its biggest in 14 years, puts the currency at the top of investor watch lists. 

Absolute levels for the euro are still below its levels since ECB chief Mario Draghi promised to save the euro zone, but it is the speed of the move that is a concern. 

On a trade-weighted basis, the euro EUR=ECBF has gained nearly 6 percent in less than five months. That strength creates obstacles for both economic growth and inflation in the euro zone. 

Sources told Reuters last week that euro strength could delay ECB plans to roll back stimulus, and Draghi is sure to be asked about the currency in the post-meeting news conference.

2. POLICY STATEMENT

With currency strength making a rare appearance in the minutes of the last policy meeting on July 20, markets will watch if the currency gets more attention in the formal post-meeting statement this week. 

Despite the reference, Morgan Stanley analysts say mention of the currency has dropped sharply in recent months after data-mining each policy statement and accompanying press conference since 1998. 

July’s policy statement had an abnormally low nine mentions of the currency compared with an average of 27 in the last two years and far below 56 times at its March meeting.