The Euro has declined rather steady over the past month, briefly dropping below the 1.30 mark, from the combination of poor economic news and the lack of a clear victory in the Italian election. Looking at the longer term factors this could set the stage for the ECB to look at making their currency more attractive to borrow in. In short, lower interest rates and become a funding currency. This would provide two functions, should it occur.
First, it would be the most feasible politically. By lowering rates the ECB can avoid the hassle of the EU countries to come to some sort of agreement on the ability to implement a simulative plan. With lowering inflation figures coupled with lower commodity prices; it will also be within the mandate of the ECB without the threat of inflation breaking above the 2% level.
Secondly it will make the availability of loans more accessible through lending from banks now that the risks have subsided in many regions of the bloc (as seen by the relatively small move in yields on Italian bonds after the election). This will also help to create a pro growth agenda without having the budget, or political power in Brussels to achieve this goal.
I do not think that the ECB meeting this Thursday could produce a cut in rates, but the language might hint towards the possibility of lower rates in the future. As a trade I am putting on diversified currency pairs to the Euro to both play the drop and over a longer term collect roll on the interest rate differentials that exist.