ECB Quick Analysis: Why this may be a selling opportunity on EUR/USD


  • EUR/USD has jumped on the high interest rate attached to the ECB's new funding scheme.
  • Markets have ignored the pushback on interest rates.
  • The euro may turn down, providing a selling opportunity. 

Follow all the developments in the ECB live coverage

The European Central Bank has surprised markets by announcing a relatively high interest rate on the new funding scheme – 10 basis points above the deposit rate. The terms of this TLTRO program have sent the euro higher as markets ignored the pushback in the guidance regarding interest rates.

The ECB has now pledged to keep interest rates low at least through the first half of 2020 – no less than six months – a substantial dovish tilt from a central bank that has negative interest rates.

And additional adverse news may still come. 

ECB President Mario Draghi has often painted a dark picture of the euro-zone economies and also of the global one. He may highlight the risks of trade wars – or protectionism in his jargon. A dovish message will probably be accompanied by a downgrade of economic forecasts from the Frankfurt-based institution's staff. 

And even if Draghi refrains from rocking the boat – it is already sinking. Once the dust settles, markets may realize that the bank is set to keep its ultra-loose monetary policy for longer and may even opt for renewing Quantitative Easing it worked so hard to conclude last year. 

All in all, there is more negative than positive in the ECB's decision – and euro bulls could pay the price. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD: Stable amid trade calm and German stimulus hopes

EUR/USD is trading just below 1.1100, stable. President Trump expressed optimism about reaching a trade deal with China while Germany's Scholz opened the door to stimulus.

EUR/USD News

GBP/USD steady around 1.2150 after Yellowhammer leak, ahead of Corbyn's speech

GBP/USD is trading above 1.2150 amid reports of food shortages in case of a hard Brexit and a speech by Labour's Corbyn about stopping such a scenario. Election speculation looms.

GBP/USD News

USD/JPY bounces off 106.25, focus on Fed minutes, Jackson Hole

USD/JPY bounces off the key support at 106.25 and heads back towards the 106.50 level, in response to downbeat Japanese trade data, risk-on action in the Asian equities and higher Treasury yields.

USD/JPY News

Forex Today: Calm amid Trump's optimism for a deal, ahead of Corbyn's Brexit speech

The market mood is calm and currencies are little changed after US President Donald Trump expressed optimism on reaching a deal with China.

Read more

Gold: Under pressure after bearish outside day, eyes sub-$1,500 levels

Gold is flashing red after Friday's bearish outside day candle. The yellow metal created a bearish outside day candlestick pattern on Friday, which occurs when the trading range engulfs preceding trading day's high and low.

Gold News

Majors

Cryptocurrencies

Signatures