ECB meeting – MaiMarFX

U.S. Job Report To Take Center Stage

March 4, 2024/in General News & Updates /by MaimarFX

Welcome to a new trading week which promises heightened market volatility, driven by high-impact risk events such as the European Central Bank decision, Federal Reserve Chair Powell’s testimony before Congress and the all-important U.S. payrolls.

Fed’s Powell will appear before Congress both on Wednesday and Thursday for his semiannual testimony. Traders will look for further insights into policymakers’ current thinking, the economic outlook and thus, the timing of rate cuts.

Also on Thursday the ECB will take the stage but no changes are expected. Recent weak European data could lead ECB policymakers to adopt a more dovish tone which would increase pressure on the euro. The longer the ECB waits to cut rates, the more painful the downturn might be, which is why a patient approach could force the central bank to cut rates even deeper later on.

The main event this week, however, will be the U.S. jobs report on Friday. Market participants expect another round of solid jobs numbers. A stronger-than-expected jobs report could delay the Fed’s rate-cutting cycle. This would be positive for the U.S. dollar.

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A Euro Slump Is More Likely Than A Recovery

July 18, 2022/in General News & Updates /by MaimarFX

Welcome to a new and crucial trading week.

The European Central Bank is expected to begin raising interest rates this month for the first time since 2011. The ECB’s decision and press conference are scheduled for Thursday.

After years of low inflation, the ECB is now confronted with a price spike that forces policy makers to join the kind of aggressive policy tightening deployed elsewhere. In a normal world, aggressive monetary policy tightening would buoy the euro but the risk of a euro-area recession is now seen at 45 percent, up from 30 percent in June. Apart from the eurozone’s gloomy outlook we also have to understand the role of the U.S. dollar.

The dollar’s gain is the world’s pain. A stronger U.S. currency has historically translated into a broad hit to the world economy. Higher-than-expected inflation has forced the Federal Reserve to hike rates at the fastest pace in decades and this kind of aggressive tightening has supercharged the U.S. dollar. Tighter U.S. monetary policy tends to boost inflation elsewhere because of the currencies that weaken against the dollar. Additionally, there is a European problem which sends the euro lower and the dollar higher in return and worsens the manufacturing cycle. Germany faces a double whammy as soaring natural gas prices also cut into its manufacturing sector. Germany’s economic growth model was for decades built on cheap Russian energy and without German growth the outlook for the Eurozone could be dark. As for the Fed and with U.S. inflation standing at 9.1 percent, the central bank has little room to reverse course on its tightening mode to provide some relief to exporters and leveraged borrowers around the world.

What is expected from the ECB on Thursday?

A 25bp hike this month is described as a done deal, followed by a 50bp move in September and 25bp increases in October and December. However, with Eurozone annual inflation currently at 8.6 percent a larger-than-expected hike may be needed. The question of 25 or 50 basis points, already controversial, would have been the main issue by now were it not for an outbreak of Italian debt turmoil that forced ECB President Christine Lagarde to hold emergency talks and extract a pledge for a new tool. The ECB will want to keep Italian borrowing costs under control in an effort to spur economic growth. The political turmoil in Italy could thus complicate the European Central Bank’s efforts to raise interest rates.

Whatever happens, a further slump in the euro is more likely than a recovery.

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Event-Laden Trading Week

December 13, 2021/in General News & Updates /by MaimarFX

Welcome to the last fully-liquid and event-laden trading week of the year 2021. Before the liquidity drain towards the end of the year, this week is overloaded with major event risk such as the FOMC rate decision on Wednesday and the rate decisions of the Bank of England and European Central Bank on Thursday. Traders are thus prepared for surprise volatility this week.

Top event risk will be Wednesday’s FOMC decision and while the tone-setting Federal Reserve carries far more weight than other central banks, the Fed will avoid triggering surprise volatility. There will be no change in interest rates but catalysts for potential market moves will be the pace of tapering and the timeline for rate hikes. FOMC officials have recently signaled a hawkish shift in their policy stance amidst elevated inflation (CPI hit a nearly four-decade high last Friday), robust economic growth and strengthening labor market conditions. Market participants have thus pushed rate hike speculation up to two full Fed hikes in 2022. Even if Fed officials have turned slightly more hawkish, the Fed perhaps cannot live up to the market’s more hawkish expectations. Traders should thus be prepared for disappointment and a potential U.S. dollar retreat.

Bank of England rate hike unlikely

The risks remain tilted to the downside for the British pound while the market still sees a 42 percent chance of a 15bps rate hike Thursday. However, the BoE is not expected to raise rates this time due to the newly uncertain economic outlook. Moreover, the BoE is much more likely to raise rates in months when it also delivers forecasts and a press conference where it can explain the decision to the public. The next one of those will be in February. Nonetheless we bear in mind that policy makers have warned that the consequences might be steeper when rates are raised later. In other words, BoE policy makers may have to raise rates further than markets currently expect to moderate inflationary pressures.

GBP/USD Technical view: Chances of a reversal

Given the oversold situation of the pound in longer time frames, we may get close to peak bearishness with increasing chances of a reversal toward 1.35. As long as the cable holds above 1.3150 and 1.31, bulls may regain some control in this pair.

Euro traders are well advised to sit on the sidelines until Thursday

The European Central bank meeting on Thursday is difficult to predict as there could be an internal battle between hawks and doves. The dovish core of the council will want to avoid premature tightening while high inflation and near-term upside risks could justify the removal of the ECB’s policy support. However, as long as an interest rate hike is not in the cards, the euro may trend to the downside against other peers.

EUR/USD Technical view: Waiting for a bear flag confirmation

In longer time frames the euro formatted a potential bear flag (green trend channel lines) within the recent downtrend. Should the pair now show a weekly close below 1.1250, we could have a confirmation of the bear flag with the focus shifting to lower targets at 1.11 and 1.10. For a bullish breakout on the other side, we would need to see a significant break above 1.1450. As long as the euro remains trading between 1.1450 and 1.1250, we will maintain a wait-and-see attitude.

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Focus on ECB Decision And U.S. Economic Growth

October 28, 2021/in General News & Updates /by MaimarFX

Market participants are awaiting the European Central Bank decision today as well as the U.S. GDP report which is likely to show a cooling recovery.

Today’s decision has been flagged only as a stepping stone toward a far more crucial ECB decision in December. Recently, rate-hike bets have kept surging in the market and ECB officials step in to calm down rate hike repricing. Chief Economists Philip Lane warned financial markets that they are wrong to anticipate a rate hike as early as at the end of next year.

The central bank relies on its non-standard tools to support the euro area and ECB President Christine Lagarde could remind the market that the ECB is serious enough about their forward guidance amid an unlikely persisting high-inflation scenario.

The euro may face headwinds if the ECB sticks to the same script as the one at the September meeting while no large currency moves are expected. In turn, if Lagarde hints on the ECB exit strategy, we may get some kind of bullish reaction in the EUR/USD.

However, as for profitable currency movements, we do not expect today’s meeting to serve as a major driver in the market.

EUR/USD: Technically, we see a next support zone between 1.1570-60 which could limit losses. On the upside we would wait for a rise above 1.1630 in order to anticipate a leg up towards 1.1665 and possibly a run for 1.1720.

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EUR/USD: On Its Way Toward 1.17?

October 25, 2021/in General News & Updates /by MaimarFX

The U.S. dollar was virtually unchanged last Friday after Federal Reserve Chair Jerome Powell sounded a note of heightened concern over high inflation, while making clear that the Fed will begin tapering bond purchases shortly. While Powell said during Friday’s virtual panel discussion “the risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation,” he played down interest rate hikes. “I do think it’s time to taper and I don’t think it’s time to raise rates.” However, there is concern that faster tapering or more rate hikes will create the risk of a slowdown.

The Fed is expected to announce its taper at their policy meeting next week on Nov 3.

This week we will have the European Central Bank decision on Thursday, as well as the U.S. GDP (Thursday) and core PCE data (Friday). From a fundamental perspective, the U.S. dollar might be vulnerable to a larger correction going into the end of the month as Thursday’s U.S. GDP report is anticipated to show a slowing recovery.

As for the ECB meeting, no policy shifts are expected this month. The ECB is preparing for a major policy overhaul at the final ECB meeting in December. Policy makers are expected to start phasing out the emergency plan in December while it could be followed by a new program. This Thursday, the focus will be on the press conference and any hints from ECB President Christine Lagarde on faster interest rate increases amid a global surge in inflation. Current expectations see no ECB rate hike through at least 2023.

To sum up, Thursday’s decision could end with no movement in the EUR/USD.

EUR/USD: In short-term time frames, we will pay attention to a break above 1.1670 which could see a test of 1.17/1.1710. Bears on the other side, will wait for a significant break below 1.16 in order to shift the focus toward 1.15.

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ECB Meeting Is The Only Interesting Event This Week

July 19, 2021/in General News & Updates /by MaimarFX

Welcome to a new trading week everyone.

It will be a notably quiet week in terms of economic data with the only key event being the European Central Bank policy decision on Thursday. ECB President Christine Lagarde said last Sunday that market participants should prepare for new guidance on stimulus but according to officials familiar with the matter, ECB policy makers are split over changes to their language on monetary stimulus.

It is clear that the implementation of the ECB’s new inflation strategy should confirm the central bank’s dovishness and that an exit from its accommodative policy is still very distant. In short, the ECB is seen as one of the most dovish of the major central banks which should keep the euro under pressure. The question is however, how much of that dovishness has already been priced in to the euro’s exchange rate? For the EUR/USD to fall towards 1.17, the ECB will have to send a strong dovish message while convincing the market that the new strategy is a forceful change in guidance. We will know more on Thursday.

GBP/USD

The pound found some support around 1.3750 amid hawkish comments from Bank of England members. While the possibility of a rate hike in the first half of 2022 could generally keep the pound supported, in short-term time frames, we now look at a break below 1.3730 which could lead to a test of 1.37/1.3690 and possibly even 1.3650. A current resistance is however seen at around 1.3870.

DAX: Breaking below 15400 could see a dip towards 15300 and possibly even 15100. On the upside, the 15800-border has so far proved a difficult hurdle for DAX bulls and we may have to wait some time before we see a sustained upside break.

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Traders Eye ECB Decision And U.S. Inflation

June 10, 2021/in General News & Updates /by MaimarFX

Both EUR/USD and GBP/USD have been trading in tight price ranges given the onset of the summer lull, making it difficult for traders to profit from low volatile swings. Even technical price breakouts provided little follow-through as volatility ebbs. However, today might be different with traders eyeing the U.S. key inflation report and European Central Bank decision for clues on the direction of monetary policies. We brace for bigger market moves around the ECB decision at 11:45 UTC and the inflation report due at 12:30 UTC.

As for the inflation report, expectations are that even a little higher reading won’t change the Fed’s monetary policy path right now. Fed policy makers are in a wait-and-see mode and do not intend to surprise the market with premature policy changes at their meeting next week. If there is, however, a significant higher inflation reading, taper talk is about to intensify with the U.S. dollar soaring ahead of the Fed meeting.

The ECB is likely to follow the Fed’s lead and keep ultra-loose monetary stimulus in place. Neither the Fed nor the ECB is expected to slow the pandemic bond buying at their meetings this month. Economists expect policy makers to opt for another three months of the very accommodative monetary policy. Central banks could taper bond-buying in September at the earliest.

In a nutshell, while we do not expect fireworks today, we brace for higher volatility that could provide profitable trading opportunities.

EUR/USD: Bulls were unable to stabilize the pair above 1.22 ahead of today’s risk events. We will keep tabs on a significant break above 1.2250 in order to expect further gains. Above 1.2270, the next higher target is 1.2350. On the downside, if the euro breaks below 1.2130 and further 1.2090, we could see accelerated bearish momentum towards 1.1950.

GBP/USD: After the cable failed to hold above 1.42 the focus shifts to a break below 1.4090 that could lead to further losses towards 1.40. On the upside and following a renewed break above 1.42, a higher target is seen at 1.4280. How the pair will trade in short-term time frames could however mainly hinge on the greenback’s performance today.

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Inflation Will Be Key – Not Only For Fed But Also For The ECB

June 7, 2021/in General News & Updates /by MaimarFX

In the end, there were no dramatic price fluctuations Friday with U.S. jobs missing expectations. The payrolls report showed 559K jobs in May, a number that fell short of economists’ estimates while a half million new jobs is still a good growth number. The jobless rate fell to 5.8 percent while wage growth increased. As for the Federal Reserve policy stance, the shortfall in job growth, along with views that recent inflationary pressures will prove temporary, may help explain the Fed’s adhering to its ultra-loose policy.

The U.S. dollar depreciated against other peers in a first reaction to Friday’s report but the greenback’s drop was not sustained to push the euro or British pound above current resistance levels.

EUR/USD: As long as the pair trades between 1.2350 and 1.20 there is nothing new to report.

GBP/USD: Friday’s gains were capped at 1.42 and if sterling bulls are unable to push the pair above that barrier and further above 1.4270, the focus is on a break below 1.4070 but more importantly below 1.40.

While the slightly softer-than expected job gain probably won’t change the Fed’s thinking, another rise in inflation could spur the taper talk. The U.S. consumer price index is scheduled to be released on Thursday.

Also on Thursday, the European Central Bank will decide whether faster bond-buying will be extended until September to ensure the economic rebound. Economists expect the ECB to keep the pace of weekly bond buying unchanged through the summer before slowing down. However, this meeting could be tricky since the economic outlook is looking brighter, making it difficult for ECB policy makers to avoid a debate about a policy shift. While the short-term outlook is improving, the ECB may use a dovish rhetoric on medium-term inflation.

As for the ECB’s rhetoric, policy makers may stress that it is too early to withdraw any kind of stimulus with the taper debate returning to the fore after the summer.

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EUR/USD: What Is Of Importance In The ECB Statement

March 11, 2021/in General News & Updates /by MaimarFX

Weaker-than-expected U.S. consumer price inflation data eased concerns about the U.S. economy overheating and drove the U.S. dollar lower against most of its peers Wednesday. The euro and pound benefited from the weakening greenback and both EUR/USD and GBP/USD ended the trading day in higher territory.

Despite the softer-than-expected CPI figures, inflation is poised to accelerate in the months ahead driven by stronger demand and pandemic stimulus. Federal Reserve officials, on the other side, have brushed off inflation concerns and expect any pickup to be transitory.

The next high-impact event will be the European Central Bank policy announcement which is due today at 12:45 GMT followed by President Christine Lagarde’s press conference at 13:30 GMT.

ECB policy makers must decide whether rising yields pose such a threat to the EU economy that they have to take action. No change is expected to the deposit rate of -0.5 percent and even a decision to extend the central bank’s 1.85 trillion-euro pandemic bond-buying program beyond the current end-date of March 2022 looks unlikely today. Instead, the focus will be on the ECB’s rhetoric. If there is any hint that the ECB plans to deploy the flexibility instrument in order to contain yields, the euro could fall towards 1.1820 and 1.1750. Also, if Lagarde stresses that higher bond yields are triggering an unwarranted tightening of conditions, it should be taken as negative for the euro.

However, ECB policy makers are likely to be cautious with their language and if today’s statement turns out to be less dovish as expected, the euro could rally.

EUR/USD

Looking at the technical picture, there is a chance for a potential bull breakout today, provided that the euro takes out the 1.1960-hurdle. Above that level a potential inverted head-shoulders-pattern could be in play, targeting at higher price levels around 1.2050. The pattern, however, becomes void with a downside break of 1.1850.

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Focus On U.S. CPI And ECB Decision This Week

March 8, 2021/in General News & Updates /by MaimarFX

Friday’s U.S. jobs report beat all estimates and showed an increase of 379,000 jobs in February while the unemployment rate dropped to 6.2 percent. Economists expect that the re-opening of services along with a decline in Covid-19 cases will lead to an even stronger job gain in March and in the coming months. The report adds to recent evidence that the U.S. economy is gaining momentum and with the prospects of more fiscal stimulus U.S. stocks advanced and the dollar appreciated.

This week, the focus will turn to U.S. CPI data on Wednesday and the European Central Bank policy announcement on Thursday. Looking ahead, the U.S. dollar’s strength may continue as the outlook for the U.S. economy brightens. U.S. inflation on a year-over-year basis is expected to increase to 1.7 percent from the prior 1.4 percent and that outlook may inspire additional confidence in the economic recovery, bolstering the demand for dollars.

On Thursday all eyes will be on the ECB decision and while there will be no major easing of monetary policy, a decision to step-up bond purchases would have a negative impact on the euro and could thus increase selling pressure in EUR/USD. Given that the jump in the yield on the Eurozone’s benchmark 10-year German Bund is unwelcome by ECB policy makers, stepping up the ECB’s bond purchases cannot be ruled out at this meeting. Conversely, if nothing concrete is announced by ECB President Christine Lagarde, the euro could strengthen following her news conference.

EUR/USD

The euro is currently testing the 1.19-support on its hold and if that level is significantly breached to the downside, we see lower targets at 1.18 and 1.1750. However, given the pair’s oversold situation there are also chances for small rebounds. The 1.2050-level may serve as a current resistance for euro bulls but the euro’s further price action will finally hinge on the ECB’s decision.

GBP/USD

Following the recent sell-off in the pound the pair approaches oversold territory. It will now be interesting whether bearish momentum will be strong enough to push the pair below 1.3770 and further 1.3750, opening the door for a steeper decline towards 1.35. For bullish action to regain strength we must see a break above 1.39 but more importantly above 1.4020.