ECB is widely expected to raise interest rates today, and lift the main refinancing rate by 25bps to 4.00%, the highest level since 2001. The deposit rate, once negative, will correspondingly be raised to 3.50%. The bigger question is about forward guidance, but it’s unlikely for President Christine Lagarde to shift from the “data-dependent”, “meeting-by-meeting” approach for any future decisions. Nevertheless, the new economic projections could still reveal some hints on ECB’s thought.
Some previews on ECB:
As for market reactions, we’d be closely watching EUR/CHF. A short term bottom should be in place at 0.9670, after hitting 61.8% retracement of 0.9407 to 1.0095 at 0.9670. Sustained trading above 55 D EMA will add to the case that whole correction from 1.0095 has completed today. Such development will also bolster the case that whole rise from 0.9407 (2022 low) is ready to resume later in the year. But, that might require something hawkish from ECB as a trigger.
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