- European Central Bank (ECB) to Keep Rates on Hold, Stick to Quantitative Easing (QE) Program. Updated Staff Projections on Tap.

- Will the Governing Council Alter the Forward Guidance for Monetary Policy or Will They Stick to the Current Script?

Trading the News: European Central Bank (ECB) Interest Rate Decision

DailyFX Calendar

Fresh updates coming out of the European Central Bank (ECB) may keep EUR/USD bid should the Governing Council show a greater willingness to move away from its easing-cycle.

The ECB may unveil a more detailed exit strategy as the quantitative easing (QE) program is set to expire in September, and President Mario Draghi and Co. may present plans to taper the asset-purchase program over the coming months as ‘incoming information pointed to a further strengthening in the pace of economic expansion.’ In turn, a material shift in the forward guidance for monetary policy may heighten the appeal of the single-currency as the central bank adopts an improved outlook for the euro-area.

In contrast, EUR/USD may face more bearish fate if the ECB merely attempts to buy more time and continues to endorse a wait-and-see approach for monetary policy. New to trading? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Impact that the ECB rate decision has had on EUR/USD during the previous meeting

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN

2018

01/25/2018 12:45 GMT

0.00%

0.00%

+94

-10

January 2018 European Central Bank (ECB) Interest Rate Decision

EUR/USD 15-Minute Chart

EUR/USD 15-Minute Chart

The European Central Bank (ECB) stuck to the sidelines at its first meeting in 2018, with the Governing Council in no rush to move away from its easing-cycle as ‘the signals coming from the monetary analysis confirmed the need for an ample degree of monetary accommodation.’ Nevertheless, the recent comments suggest the central bank will gradually change its tune as ‘incoming information confirms a robust pace of economic expansion, which accelerated more than expected in the second half of 2017,’ and ECB officials may gradually alter the monetary policy over the coming months as the quantitative easing (QE) program is set to expire in September.

Upbeat comments from the ECB propped up EUR/USD, with the pair climbing above the 1.2500 handle, but the market reaction was short-lived as the exchange rate closed the day at 1.2393. Want more insight? Sign up and join DailyFX Market Analyst Martin Essex LIVE to cover the ECB interest rate decision.

EUR/USD Daily Chart

EUR/USD Daily Chart

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  • EUR/USD carves a fresh series of higher highs & lows after failing to clear the 1.2130 (50% retracement) region, and the pair may stage a larger advance over the coming days as the Relative Strength Index (RSI) comes up against trendline resistance and appears to be on the cusp of flashing a bullish trigger.
  • A close above the 1.2430 (50% expansion) region may spur a run at the 2018-high (1.2556), with the next topside hurdle coming in around 1.2640 (61.8% expansion) to 1.2650 (38.2% retracement).

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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