The euro has broken a three-day losing streak against the dollar on Tuesday. The narrative on offer to explain the reversal boils down to a simple question: Will they, or won't they?



Dollar Strengthening/ Weakening
















Source: Bloomberg as of 3:24 p.m. EDT on Oct. 20, 2015. CAD = Canadian dollar. GBP = British pound.

For once, that question doesn't refer to whether or not the Federal Reserve will hike its policy interest rate. However, it does relate to a central bank's action (as everything in financial markets appears to do nowadays).

The pressing issue before foreign-exchange traders this week is whether the European Central Bank (ECB) will increase the size of its 1.1 trillion euro bond-buying program (technically known as "quantitative easing") at its monetary policy meeting, which will take place in Malta on Wednesday and Thursday.

Today, the prevailing winds are in the direction of "no extra quantitative easing," and with some reason. Indeed, in an interview with BFM Business TVECB on Monday, governing council member Christian Noyer described the current program as properly calibrated:

When we undertook the most recent quantitative easing program, we calibrated our purchases on very high sums. As far as I'm concerned, it's at the right level [and] it has already born fruit. I think that, today, the foot is pressing down hard against the gas pedal and the machine is reacting well.

Under the current program, the ECB would continue to buy 60 billion euros' worth of securities on a monthly basis until next September. With eurozone inflation dipping into negative territory in September, there had been increasing speculation that the ECB might increase the scale of its buying program.

Mr. Noyer heads the Bank of France (until November), and as a representative of the euro area's second-largest economy on the ECB governing council, he has some clout. Moreover, he is thought to be mildly dovish/centrist.

The ECB's latest Bank Lending Survey, published yesterday, appears to support Mr. Noyer's view that "the machine is reacting well": The Survey showed credit terms and conditions easing for the sixth consecutive quarter, with four out of 10 banks indicating that they had used the incremental funds from quantitative easing for corporate loans (36% cited an increase in consumer and household loans).