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EUR/USD: Will The ECB Shock The World And Slash Interest Rates?

As we had expected, yesterday, the euro was bearish and continued dropping ahead of today’s ECB meeting. The euro usually reacts to rumours being circulated in the market; in this case, the euro’s downfall came as a reaction to expectations regarding new extreme measures that may be taken by the ECB.

One rumour is that purchases of government bonds might be mentioned during the press conference. The ECB is also expected to keep many measures unchanged; giving them further time to take action. However, any changes made will impact the Forex market and particularly on the EUR/USD and other major euro currency pairs. In this case, the EUR/USD might reach 1.2050 today.However, by observing difficult global economic conditions, the ECB might think out of the box and unexpectedly slash interest rates once again.

Here are the major Resistance (R) & Support (S) levels of the EUR/USD:

  

S2 1.2050

S1 1.2274

Pivot Point 1.2300

R1 1.2350

R2 1.2450

 

 
   
 
       
 

As for today’s figures, starting with the UK, the Bank of England’s (BOE) monetary policy committee members will vote on the interest rate.

Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuations.

  • Forecast: 0.50% 
  • Previous: 0.50% 

A higher than expected rate is positive for the GBP, while a lower than expected rate is negative for the GBP.

Concerning the Euro’s data, the six members of the European Central Bank (ECB) Executive Board and the 16 governors of the euro area central banks will also vote on the interest rate.

  • Forecast: 0.05% 
  • Previous: 0.05% 

A higher than expected rate is positive for the EUR, while a lower than expected rate is negative for the EUR.

This will be followed by the most important event of the day, the European Central Bank (ECB) press conference. It is a monthly press conference held 45 minutes after the Minimum Bid Rate announcement. This conference is an hour long and divided into two parts. First, a prepared statement is read, and then the conference is opened to questions from journalists.

The press conference examines the factors which affected the ECB’s interest rate decision and deals with the overall economic outlook and inflation. Most importantly, it provides clues regarding the future direction of monetary policy.

High levels of volatility can be observed during the press conference as answers to questions from journalists are unscripted.

Moving to Canada, the Ivey Purchasing Managers Index (PMI) is scheduled for release. It measures the activity level of purchasing managers in Canada.  A reading above 50 indicates an expansion in the sector; while a reading below 50 indicates a contraction.

Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

  • Forecast: 53.2 
  • Previous: 51.2 

A higher than expected reading should be taken as positive for the CAD, while a lower than expected reading should be taken as negative for the CAD.

We wish you luck in your trading activities. For any further assistance, please do not hesitate to contact us at [email protected].   

Disclaimer The prices and news mentioned in this outlook are absolutely no guarantee of future market performance. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades. Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss. Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.

 

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