Here’s what financial markets are looking for from the ECB

3. STAFF FORECASTS

Revisions to the ECB’s staff projections following recent gains in the euro is another important focus.

Markets expect a slight downward revision in core inflation forecasts, although analysts said the ECB’s long-term forecasts may be little changed and should not in themselves derail plans for tapering next year. 

Inflation in the 19-country currency bloc, which the ECB aims to keep just below 2 percent, accelerated to 1.5 percent in August from 1.3 percent. 

The ECB forecasts inflation of 1.5 percent in 2017 and 1.3 percent in 2018. 

4. TAPERING

Markets have pushed back expectations for when the ECB will signal a scaling back of its stimulus, to October from September. The latest Reuters poll predicts the same. 

Still, ECB comments will be scrutinized for any clues on the timing and scale of a taper.

About 36 percent of government bond yields in the euro zone are below zero, compared with a peak in June 2016 of 51 percent, according to JP Morgan Asset Management. Globally, 30 percent of government bond yields are sub zero. 

Frederik Ducrozet, an economist at Pictet Wealth Management, expects the ECB to lay the groundwork for the decision to be made by year-end, tasking its committees to study all policy options for 2018. 

5. BOND-BUYING PARAMETERS

The ECB may also be questioned about a growing scarcity of eligible bonds for the bond-buying scheme, which might encourage it to wind down stimulus sooner rather than later. 

The ECB bought fewer German bonds in August than in any month since the start of the stimulus programme, suggesting it was holding back to avoid running out of debt to buy. 

As the ECB pushes against its self-imposed limits for asset purchases, bond investors will be looking for any changes in the composition of the bond-buying scheme -- whether that’s in country allocation or changes in the mix of corporate and government bonds in the scheme. 

6. MARKET IMPLICATIONS

The market reaction itself could be in the spotlight, especially if the euro moves sharply either way.

European stocks peaked at a two-year high in May, and the pan-European STOXX 600 equity index has fallen by around 6 percent since then, with euro zone stocks .STOXXE shedding a similar amount. Some investors blamed the euro’s blistering ascent as the main culprit. 

European banking stocks .SX7P will benefit from any hawkish slant, as a low-rate environment has hurt margins. Banks have so far underperformed the broader market and are relatively cheap. 

If the ECB maintains the status quo, European stocks may rise, as companies in the pan-European equity index get more than half their revenues outside the euro zone, according to estimates from Societe Generale.