European Central Bank Keeps Interest Rates Unchanged, Eyes Turn To Lagarde’s Guidance!

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  • The Euro dives in the minutes after the European Central Bank releases its interest rate decision and statement.
  • Representatives of the European Central Bank advise they do not believe inflation will reach the 2% target in 2024.
  • European economists advise inflation in the EU will reach a low of 2.3%.
  • The EURJPY declines by 1.25% on Thursday. Both currencies continue to be the market’s worst and best performing individual currencies of the day.

EURUSD – European Central Bank Keeps Interest Rates Unchanged!

The EURJPY is witnessing the clearest and largest price movement during this morning’s Asian and European Sessions. However, the EURUSD has a much lower spread and swap fee, plus is likely to witness continued volatility due to more economic releases. The EURUSD is now retracing back to the breakout level from the day before and is yet to break below. For this reason, the price action is yet to indicate a stronger downward trend in favor of the Dollar.

Furthermore, the exchange rate continues to remain in the buy zone when evaluating Moving Averages and Oscillators. These include the 75-bar EMA, 100-bar EMA and RSI. Though investors note the price is trading below the VWAP which gives a sell signal for the day. However, the momentum continues to remain downward for the moment and the developing trend will largely depend on tomorrow’s employment data for the US.

For the Euro, more volatility is likely when ECB President Lagarde joins a press conference and will take questions directly from journalists. The monetary policy statement advises that inflation will remain higher than the target in 2024 and this is mainly due to wage growth. However, economists are quick to note that the inflation guidance remains lower than most regions.

Short term traders should note that it is equally important what the market believes, not just what the ECB president states. On many occasions the central bank will point in one direction, but the market continues predicting another. Bloomberg analysts advise the ECB is likely to continue having lower rates over the next 3 years. Nonetheless, investors should note the price action may change during her press conference.

EURUSD – US Employment Data

This afternoon’s Weekly Unemployment Claims for the US read as expectations and did not differ to previous weeks. However, tomorrow’s employment data is believed to be significantly weaker than the previous months. The NFP is expected to decline from 350,000 to 197,000 and the Average Salary increase to fall from +0.6% to 0.2%. However, if the data reads higher than expectations, as it has over the past 3 months, the US Dollar may witness further gains against the Euro.

Lastly, investors also note that no significant data is due for the Eurozone tomorrow or next week. If we look at price action, a sell signal has already been seen as the price has broken through the breakout level. However, indicators are yet to indicate a sell as the price previously saw strong gains. The Fibonacci levels based on the previous impulse wave, will signal a correction if the price breaks below 1.08680 (61.8 Fibonacci Level).

Michalis Efthymiou

Market Analyst

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