When is the ECB monetary policy decision and how could it affect EUR/USD?

Haresh Menghani FXStreet

ECB monetary policy decision – Overview

The European Central Bank (ECB) is scheduled to announce its latest monetary policy update at 12:45 GMT this Thursday and is widely expected to leave monetary policy settings unchanged. Hence, the key focus will be on the accompanying monetary policy statement and the post-meeting press conference, scheduled at 13:30 GMT. The policymakers could express their displeasure over the high exchange rate of the shared currency and its negative impact on the inflation outlook.

As FXStreet's own analysis, Yohay Elam explains: “Another issue is the high exchange rate of the euro, which pushes prices of imported prices lower, and makes European exports less attractive. EUR/USD shot higher amid falling demand for the safe-haven dollar which is the result of the decisive US elections and more importantly, the breakthroughs in coronavirus vaccines. Europe's harsh winter covid wave failed to push the common currency lower.”

How could it affect EUR/USD?

Investors will closely scrutinize the ECB President Christine Lagarde's comments and look for hints that the central bank may take additional measures to curb further appreciation of the euro. This, in turn, might infuse some volatility around the EUR/USD pair. “Without the credible threat of cutting interest rates, any EUR/USD could prove a "buy-the-dip" opportunity”, writes Yohay Elam.

Yohay also provided important levels to trade the EUR/USD pair: “The weekly high of 1.2155 is the first line of resistance. It is followed by 1.2180, a stepping stone on the way down. Further above, 1.2225 was a high point last week. The former triple bottom of 1.2125 is a soft support line. Further down, 1.2075 was a swing low on Wednesday, and it is closely followed by the 2021 bottom of 1.2055.”

Key Notes

• ECB Preview: Lagarde may trigger a “buy the dip” opportunity by trying to talk down the euro

• EUR/USD Forecast: ECB set to spark the next rally after the Biden boost

• EUR/USD resumes the upside beyond 1.2100 ahead of ECB

Description

ECB Interest Rate Decision is announced by the European Central Bank. Usually, if the ECB is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the EUR. Likewise, if the ECB has a dovish view on the European economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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