ECB Meeting Minutes Preview: Translations, Trade, Ticking Inflation, And The Timing Matter

• The ECB Meeting Minutes will shed light on the July meeting, which ended in a lower Euro.
• Clarifications about the rate hike, Trump's trade, and ticking inflation stand out.
• Coming after the Fed minutes, it could serve as a reminder for the ECB's dovishness.

The European Central Bank releases its Monetary Policy Meeting Accounts on Thursday, at 11:30. The document provides a deeper insight into the July meeting.

Rate hike timing

The central theme back then was: what is the meaning of summer? In the previous meeting, the ECB pledged to keep interest rates at current low levels through the summer of 2019. However, reports that came out later revealed a disagreement between members and different translations to different languages, suggesting a rate hike before September.

In July, Draghi clarified that the only valid language is English and that the end of the summer means not before September. The clarification, coming as a response to a reporter's question, sent the Euro down. The document will reveal if all members agreed with Draghi, thus weighing on the euro,  or if the hawks insisted on an earlier date, and this can help the common currency.

Trade

The meeting back then came immediately after the meeting between US President Donald Trump and EU Commission President Jean-Claude Juncker. The leaders agreed on trade negotiations and no new tariffs in the meantime. The ECB welcomed the results.

A few weeks before these events, reports came out that the members of the Frankfurt-based institution are concerned about the potential impact of the trade wars on the fragile recovery of the euro-zone. The meeting minutes may add some information on the level of importance that the ECB gives to any developments on this front. Repeated mention of protectionism could weigh on the euro.

Single needle in the compass

The ECB's mandate is clear: inflation at or a bit below 2 percent. They have no employment mandate, and core inflation is not officially targeted. Nevertheless, everything is related. While inflation is at the target, core inflation is lagging behind at 1.1 percent. Draghi and his colleagues are well aware of the impact of elevated oil prices on inflation and do mention subdued underlying price pressures in their communications.

The large document from the meeting may unveil a few more insights about how the Governing Council sees price development. If the general notion remains that underlying prices will eventually pick up thanks to an improvement in wages, the euro could rise. If they express skepticism about and are worried about risks to price development, the common currency could come under pressure.

Timing 

All in all, the timing of the rate hike, trade concerns, and inflation are crucial to the reaction of the euro. Given the recent tone, there is a higher chance that the minutes will remain dovish, or at least cautious. 

The timing of the publication is also of importance. The ECB releases its latest minutes fewer than 24 hours after the Fed makes known its minutes from the most recent decision. The tone of the Fed was decidedly optimistic, and they left the door wide open to another rate hike in September. The minutes may be more balanced, but the direction of travel is clear: further gradual rate hikes.

The mere contrast between a mostly hawkish Fed and a primarily dovish ECB could be enough to push the pair lower even if the ECB Meeting Minutes do not reveal significant concerns we had not heard before.