ECB 2022 Rate Hike Off The Table?

The anti-risk U.S. dollar weakened while we saw rebounds across the board Wednesday. The sentiment was lifted yesterday following a report that Ukraine is open to discussing Russia’s demand of neutrality as long as it’s given security guarantees. Volatility is however not over and the outcome of the war in Ukraine is still a big unknown.

Today traders will turn their eyes to the European Central Bank decision and ECB press conference at 12:30 UTC. At the same time, we will have U.S. inflation data due for release.

What to expect from the ECB?

While the ECB was already attempting to suppress the market’s rate hike speculation in 2022 before the threat to economic growth from Russia’s invasion began to rise, the new situation will possibly only harden their position. With the implications of the war in Ukraine still uncertain, it will be too early to send a hawkish message this month. While even higher inflationary pressure pushes policy makers toward policy normalization, the duration of the war could delay the exit from the ECB’s expansionary monetary policy.

In short, with chances of a 2022 rate hike tending towards zero, further gains in the EUR/USD pair might be limited.

EUR/USD – Strong rebound

Following yesterday’s incredible ‘risk on’ day with the euro’s rise towards 1.11, we may see some bullish extension until approximately 1.1170 before selling pressure accelerates again. Bears will watch out for a fresh decline below 1.0940 in order to sell euros towards 1.07.

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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