Jump to content

Live Data Coverage: ECB Monetary Policy Decision

Recommended Posts


ECB, EUR Price Analysis & News

  • ECB to Pave the Way For Rate Hikes
  • Pushback on 50bps Hike to Result in Lower Euro

LIVE ECB COVERAGE: We will be providing live coverage of the ECB Decision from 12:30BST.

OVERVIEW: The ECB is set to announce an end to its asset purchase program, which will allow for a rate rise at its July meeting, as per the central bank’s forward guidance. While a rate rise today is unlikely the probability of such action is not zero. Elsewhere, attention will be placed on whether President Lagarde leaves the door open to a 50bps rate rise. What’s more, with the latest staff projections also released, the 2024 inflation forecast will garner the most attention for market participants.

Since the April meeting, the inflation outlook in the Euro Area has deteriorated further with headline prices rising to a fresh record high of 8.1% in May, from 7.4%, which in turn has prompted ECB Officials to step up their hawkish rhetoric. However, this begs the question, why not hike at the June meeting?. The answer to that is “sequencing”. ECB Chief Economist Lane broke the ECB’s previous rule of never pre-committing to policy action by announcing a roadmap of normalisation steps, involving the end of APP in July, followed by two 25bps rate hikes in July and September. This is effectively the base case scenario.

25bps or 50bps for the ECB

Meanwhile, a hawkish twist would be for President Lagarde to side with the more hawkish members of the Governing Council and leave the door ajar for a 50bps move, which would underpin the Euro taking the currency to 1.08, given that the markets have yet to fully price a 50bps hike at the July meeting (currently 32bps priced).

How to Trade Forex News: An Introduction

What is priced in?

As it stands, money markets are pricing in over 130bps worth of tightening by year-end, which implies that markets see at least one 50bps rate rise from the central bank. However, should ECB’s Lagarde simply commit to the already laid out normalisation path by Chief Economist Lane, this would ultimately disappoint market expectations, prompting a dovish repricing. I would argue that there is an elevated risk of this happening, given the high bar to surprise on the hawkish side, which leaves EUR/USD vulnerable to a move back below 1.06.

ECB Market Pricing is Aggressive

ECB Preview: How Will the Euro (EUR) React?

Source: Refinitiv

New Tool For Fragmentation Risks

Elsewhere, despite recent reports over the ECB mulling a new QE backstop tool for peripheral debt to combat potential fragmentation risks, it is unlikely that the ECB will provide great details regarding this tool. Not only does this risk an unwind of the recent tightening in financial conditions, but the ECB is likely to maintain optionality for when the conditions arise to announce such details.



Heading into the ECB decision, the Euro has been firmer across the board, suggesting that traders are gearing up for another hawkish surprise. However, this does leave the Euro vulnerable to a pullback should the ECB stick to its pre-set normalisation and not leave the door open to a 50bps rate hike. My view is that the ECB disappoints expectations, therefore underwhelming hawkish expectations, resulting in a lower Euro. Resistance resides at 1.08, while support sits at 1.0600-25.


Jun 9, 2022 | DailyFX
Justin McQueen, Strategist

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 03/06/23 20:25
  • Posts

    • I don't know but it looks like a really awesome service Because I have come across all sorts of mixers in my work  
    • Charting the Markets: 2 June Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
    • It was a blockbuster number yesterday for the ADP private payrolls, showing 278,000 jobs opened in May, while forecasts had been for 170,000.  Jeremy Naylor | Analyst, London | Publication date: Friday 02 June 2023 IGTV’s Jeremy Naylor suggests a similar upside surprise could see almost 300,000 jobs created under the non-farm payroll count with estimates for 190,000 job creations. The unemployment rate is seen rising one notch to 3.5%. (Video Transcript) NPFs: what to expect Could yesterday's strong private payrolls number from the ADP reading give us an insight into the potential upside risk to today's non-farm payrolls? That report from ADP yesterday showed 278,000 jobs opened in May - forecasts had been for 170,000. Now the NFP expectations, 190,000 job creations are forecast for the month of May proportionately using that ADP surprise. That would mean an upside reading for NFPs close to 300,000. Why the increase? Now, the unemployment rate is seen rising one notch to 3.5%. Why is that rising? When you've got that rise in the number of job creations, the unemployment rate is not taking the same data that the jobs numbers themselves are being produced from average hourly earnings. We're looking there for that to go up 0.3% month-on-month, 4.4% year-on-year, still below the rate of inflation. Now, this chart shows the unemployment rate back to pre-Covid-19 levels. It's clear that jobs have been created at an appreciable rate and this alongside a relatively strong GDP number and inflation coming down, there may yet be a soft landing for the US economy. But if the Federal Reserve (Fed) does continue to raise rates, things may get a little bit more sticky for the economy and a little bit more difficult to predict. This is a comparison of fed funds rates and US consumer price inflation (CPI) since January 2021. So you can see here the rate at which the US central bank has been piling the pressure on the monetary markets with that rise to five and a quarter percent. And at the same time, the CPI number is coming down, which is a good thing, but it's still not down to the 2% level, 4.9% is a long way away still from the 2% target. So the Fed is entitled still to have an excuse to raise interest rates. US dollar basket Let's take a look at what's been happening with the US dollar basket. Yesterday, we saw a pullback coming through as we saw money going into risk assets because of that rubber stamping from the Senate or the vote in the Senate to approve the budget that's now gone for the presidential seal. EUR/USD And we've seen a second day in a row of losses or the euro for the dollar basket as far as the euro/dollar is concerned, bouncing away from that 76.4% retracement. And I think now, you will have been stopped out if you were short on this, you would have been stopped out on this and hopefully you would have got some profits on the way down. So that's where things are ahead of non-farm payrolls out today at 13:30 UK time. And we will be live on the IG platform at 13:25 today.
  • Create New...