EUR/USD eerily calm after the dovish ECB rates decision

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on Jun 10, 2021
  • The EUR/USD pair was unchanged after the June ECB interest rate decision.
  • The bank left interest rates and quantitative easing policies intact.
  • It also boosted the outlook for the Eurozone economy.

The EUR/USD was eerily calm after the latest European Central Bank (ECB) decision. It is trading at 1.2170, where it was before the decision came.

EUR/USD
EUR/USD price action

ECB interest rate decision

The ECB concluded its two-day monetary policy meeting on Thursday. As was widely expected, the bank decided to leave interest rates at historic lows to support the ongoing recovery. The deposit facility rate will remain intact at -0.50% while the marginal lending facility remained at 0.25%.

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The bank will also continue with its pandemic emergency purchase program or quantitative easing policy intact even as it upgraded the economic outlook. Analysts expect that the bank will keep the pace of these purchases intact for at least three more months. The statement said:

“The Governing Council will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over.”

The ECB decision came at a pivotal time for the Eurozone economy. For one, the euro has appreciated substantially against the US dollar. The EUR/USD has jumped by more than 14% from its lowest in 2020. It is also hovering near the highest level since 2018. 

The economy is also expected to stage a strong recovery as countries reopens. This is evidenced by the overall activity in most European cities like Berlin and Paris. Also, recent services and manufacturing PMI numbers have been relatively strong while business and consumer confidence is rising. EU inflation has also risen to the ECB target of 2.0%.

At the same time, some analysts have started predicting that the ECB will move earlier than the Fed even as the US economy stages a quicker recovery than that of Europe. The US will publish the latest inflation data shortly after the ECB decision. The consensus is that the consumer price index (CPI) rose by 4.7% in May while core CPI rose by 3.2%. The US will also publish the latest initial jobless claims numbers.

EUR/USD technical analysis

EUR/USD
EUR/USD technical chart

The EUR/USD pair rose slightly after the latest ECB interest rate decision. It is trading at 1.2173, which is slightly above the intraday low of 1.2165. On the four-hour chart, it is slightly above the lower side of the ascending channel. It is also at the same level as the 25-day and 15-day moving averages. It also seems like it is forming a head and shoulders pattern. Therefore, the pair will likely retreat as bears target the 38.2% Fibonacci retracement level at 1.2046.

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