Euro Price Forecast: EUR/USD Awaits ECB Rate Decision

[MongiIG]

Jul 15, 2022 | DailyFX
Warren Venketas, Analyst

EUR/USD TALKING POINTS

• Different scenarios for next week’s ECB rate decision.
• Parity still at risk as fundamental headwinds grow.

EURO FUNDAMENTAL BACKDROP

The euro has been testing parity several times this week but has yet to convincingly break below at this point. This sets up next week’s key risk event quite nicely with the ECB rate announcement scheduled on Thursday (see calendar below). Coinciding with the interest rate decision comes the expected resumption of Russian gas flows through the Nord Stream 1 pipeline on the same day and with political uncertainty at play, there is no guarantee that gas flows will resume.

The ECB has pre-announced a 25bps rate hike (which may not be the wisest choice) while money market price in 30-35bps as of now. That points to the possibility of a hawkish surprise however the current Italian political backdrop will weigh negatively on this outcome (widening BTP/Bund spreads). Key points to consider for the meeting will include more guidance around anti-fragmentation along with a weakening euro which is heightening the inflationary impact on the consumer.

[RCtrader]

It's high time for ECB to do a rate hike. The pre-announced 25bps might be low indeed, but it's a needed first step. 🤔

[Kodiak]

2008-2009?

https://www.nytimes.com/2022/07/01/business/eurozone-inflation-june.html

[RCtrader]

2 hours ago, Kodiak said:

2008-2009?

https://www.nytimes.com/2022/07/01/business/eurozone-inflation-june.html

It says the highest inflation rate ever, but ECB is still unmoved lol. However, what is the time frame that has been taken into account? 20 years? or 50 years?

[MongiIG]

On 15/07/2022 at 16:23, Kodiak said:

2008-2009?

https://www.nytimes.com/2022/07/01/business/eurozone-inflation-june.html

 

On 15/07/2022 at 19:10, RCtrader said:

It says the highest inflation rate ever, but ECB is still unmoved lol. However, what is the time frame that has been taken into account? 20 years? or 50 years?

Defining Week for the Euro: ECB Lift-Off, CPI and Bond Market Jitters

Jul 18, 2022 | DailyFX
Richard Snow, Analyst

EURO ANALYSIS

• ECB to finally achieve lift-off, Nord Stream maintenance ends and Italy PM resignation
• BTP/BUND spreads widen before immediately pulling back – volatility raised
• Key EUR/USD levels ahead of EU inflation and ECB

RISKS MOUNT IN DEFINING WEEK FOR THE EURO
ECB to Finally Achieve Lift-off

This week Thursday we have the European Central Bank (ECB) rate decision on hand. The much anticipated 25 basis point hike has been communicated extensively by ECB Governing Council members for many weeks now but there is still a possibility of a 50 basis point hike, especially if inflation data tomorrow necessitates it.