ECB decision preview: EUR/USD could rally above 1.11

Orlando Gutierrez Learn 2 Trade

ECB rate decission preview

The European Central Bank is set to announce a restart of it's asset purchasing program and a rate cut of at least 10-bps. Overnight index swaps are currently pricing in a 100% chance of a 10-bps rate cut and a 46% chance of a 20-bps rate cut.Overall, there is a 78% chance of a 20-bps rate cut later today.

Reuters informed that 80% of the economists it polled are skeptical about the bank's ability to influence inflation over the medium term.

On Wednesday the Euro dropped 0.5% against the US Dollar ahead of today's interest rate policy decision. The question is if this highly anticipated rate cut is already priced in the market? And if so, should the stimulus package disappoint investors, would the Euro rally above 1.10 against the US Dollar?

Right now the EURUSD is trading around the 1.1025 almost flat for the day (+0.13%) in the midst of Mario Draghi's press conference. A rally above 1.11 would break the inmediate bear structure and could catapult the EURUSD to retest previous base around the 1.18/20 level. But a stimulus package, no matter its size, is bearish for the EURO so if the Euro rallies against the US Dollar on missed expectations it could be short lived and a good opportunity to sell the Euro at a better price.

Author

Orlando Gutierrez

Learn 2 Trade

Orlando has been involved in the financial markets for about 10 years. His focus is Global Macro and he is a strong believer that the best way to trade the currency markets is focusing on the big picture and holding on to big macro trends.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.