ECB rate preview: stick or twist?
Economists say it’s on a knife edge. The two likely options are the European Central Bank (ECB) either raises rates again or leaves them on hold.
(Video Transcript)
The European Central Bank
The European Central Bank meets today with the announcement on interest rates at 1.15 p.m. today, UK time. It's on a knife edge. For more than a year there's been a broad consensus amongst the Eurozone's monetary policy makers that interest rates need to go up in order to tame inflation. Rates have been pushed up from flat to 4.25% since July 2022.
Eurozone recession
But with signs of an impending Eurozone recession becoming harder to ignore, and annual price growth now at half its 10.6% peak, the unity of the direction of travel is fraying. The risk? I think possibly on the upside because inflation remains hot. It has yet to be proved to those commentators that monitor this that the European Central Bank has done enough to quell inflation. Let's take a look at what's happening ahead of that decision for the EUR/USD.
EUR/USD
It's certainly going to be an area of the market to watch. It's been flatlining in the last four, five, six days or so. It's currently trading at 1.0745. I'd want to see a drop below this line of support for me to take a short position on the EUR. But much of what's happening depends on this particular trade as well as what's going on with the US dollar, where it meets on interest rates next week. And we're yet to decide what the Fed's going to do as well.
EUR/GBP
This is the EUR/GBP. And we're not too far away now from the peak of this little symmetrical pattern that's building up this triangle. Currently trading at 85.99, which is absolutely pretty much where the peak is on that. But it's several days away before we end up getting into that. But it'll be interesting to see just how hawkish or otherwise the European Central Bank is today to give some sort of direction to the foreign exchange markets. Will they, won't they? It's all down to the wire at 1.15pm on this Thursday, UK time.
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