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Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Rich Dvorak, Analyst

EURO PRICE VOLATILITY HEIGHTENED AROUND ECB MEETINGS

  • EURUSD, EURJPY, EURGBP, EURAUD, EURCAD and EURCHF tend to experience heightened volatility around European Central Bank (ECB) meetings
  • Euro price action surrounding high-impact event risk like ECB rate decisions warrants extra prudence by forex traders
  • Check out the IG Client Sentiment Report for real-time insight on EUR forex trader positioning

Larger than normal gyrations in spot EUR prices around ECB monetary policy updates should be expected by forex traders according to data pulled on major Euro currency pairs from January 2013 to September 2019. A statistical analysis on Euro price action over the 24-hours before and after the release of ECB rate decisions reveals that EURUSD, EURJPY, EURGBP, EURAUD, EURCAD and EURCHF tend to experience sizable swings in performance when compared to non-ECB meeting trading days. Though mouthwatering for volatility fiends, relatively elevated measures of volatility is broadly indicative the level of risk is running above average.

Take a look at the DailyFX Central Bank Calendarfor scheduled ECB meetings and upcoming interest rate decisions from other major central banks.

EURO PRICE VOLATILITY AROUND ECB MEETINGS

Euro Volatility Around ECB Rate Decisions EURUSD, EURJPY, EURGBP, EURAUD, EURCAD, EURCHF

The table above shows the absolute value (i.e. +/-) median change in spot EUR prices surrounding an ECB meeting, which is compared to non-ECB meeting trading days where “T” is the time that an ECB rate decision crosses the wires, “T - 1” the 24-hours prior and “T + 1” the 24-hours following the central bank’s monetary policy update.

Conclusions are the same regardless of how the data is sliced-and-diced to encompass Euro price action in the runup to and aftermath of an ECB rate decision: the central bank’s monetary policy updates broadly propels currency volatility. Alas, forex traders should thoroughly consider implementing stringent risk management techniques when trading the Euro around an ECB meeting – like placing tighter stops or trading smaller position sizes.

EUR/USD PRICE VOLATILITY AROUND ECB MEETINGS

EURUSD Price Chart Euro Volatility Around ECB Meetings

Spot EURUSD typically fluctuates +/- 43 pips on a given day, which compares to the average +/- 47 pips the day prior and average +/- 85 pips the day following an ECB meeting.

EUR/JPY PRICE VOLATILITY AROUND ECB MEETINGS

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Spot EURJPY typically fluctuates +/- 55 pips on a given day, which compares to the average +/- 59 pips the day prior and average +/- 101 pips the day following an ECB meeting.

EUR/GBP PRICE VOLATILITY AROUND ECB MEETINGS

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Spot EURGBP typically fluctuates +/- 31 pips on a given day, which compares to the average +/- 29 pips the day prior and average +/- 37 pips the day following an ECB meeting.

EUR/AUD PRICE VOLATILITY AROUND ECB MEETINGS

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Spot EURAUD typically fluctuates +/- 64 pips on a given day, which compares to the average +/- 62 pips the day prior and average +/- 94 pips the day following an ECB meeting.

EUR/CAD PRICE VOLATILITY AROUND ECB MEETINGS

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Spot EURCAD typically fluctuates +/- 58 pips on a given day, which compares to the average +/- 72 pips the day prior and average +/- 107 pips the day following an ECB meeting.

EUR/CHF PRICE VOLATILITY AROUND ECB MEETINGS

Euro Traders Beware: EUR Price Volatility & ECB Rate Decisions

Spot EURCHF typically fluctuates +/- 26 pips on a given day, which compares to the average +/- 19 pips the day prior and average +/- 29 pips the day following an ECB meeting.

FOREX TRADING RESOURCES

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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