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.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD: Bearish outside day as Fed tempers aggressive rate cut expectations

Tuesday’s bearish outside day makes today’s close pivotal. Fed officials pushed back on aggressive rate cut calls, pushing the USD higher. An above-forecast US durable goods data could yield a bearish daily close. 

EUR/USD News

GBP/USD offers fewer moves ahead of Carney’s speech

Having reversed from the 50-day SMA, mainly because of renewed Brexit fears and sluggish data from the UK’s CB retail sales survey, the GBP/USD pair trades modestly flat near 1.2685 ahead of the London open.

GBP/USD News

USD/JPY: Bulls back in charge, re-takes 107.50

The less dovish rhetoric from a selection of Fed speakers overnight continues to aid the post-FOMC US dollar recovery, prompting the USD/JPY pair to retest the midpoint of the 107 handle despite negative Asian equities. 

USD/JPY News

Conference Board Consumer Confidence: The China syndrome

The index declined to 121.5 in June from April’s revised 131.3. A much more modest drop to 131.2 had been predicted.  “The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” wrote Lynn Franco.

Read more

Gold: 100-HMA triggers the U-turn towards $1421?

Gold is on a run towards near-term horizontal-resistance following its U-turn from the 100-hour moving average (HMA) ticks it up to $1407.80 ahead of the European open on Wednesday.

Gold News

Majors

Cryptocurrencies

Signatures