ECB policy decision and press conference are the major focuses of the day. The central bank is widely expected to announce the end of net asset purchases after this month. That would set the stage for a rate hike “some after after” in July.
Markets are expecting a 25bps rate hike in July, followed by a 50bps move in September. That would bring interest rate comfortably back into positive territory, finally after eight years of negative rate policy. President Lagarde will affirm the latter view, but she’d keep the options open on the pace of tightening.
Suggested readings on ECB:
- ECB Meeting: Setting the Stage for Higher Rates
- ECB Preview – Ready for Lift-Off
- EUR/CHF Set for Breakout as Focus Turns to ECB
- Get Ready for ECB to Hikes Rates (Just Not Tomorrow)
- Key Inflection Point for the ECB at this Week’s Meeting
EUR/USD’s reaction to ECB is definitely worth a watch today. It should first be noted that EUR/USD had just bounced off above 1.0339 (2017 low) in May. An upside breakout from the near term range today will have 1.0805 support turned resistance and 55 day EMA taken out firmly. That should confirm medium term bottoming at 1.0348. In this case, even as a correction to the down trend from 1.2348, EUR/USD should rise further to channel resistance (now at 1.1159), which is close to 38.2% retracement of 1.2348 to 1.0348 at 1.1112.
