Euro Latest: EUR/USD, EUR/JPY Price Action Set Up for ECB Decision

EUR/USD Price Analysis & News

• ECB Decision: Watch for “Significantly Higher Pace” Rhetoric
• Satisfying the Hawks
• EUR/USD, EUR/JPY Technical Levels

ECB Decision: Watch for Significantly Higher Pace Rhetoric

Today’s ECB decision is unlikely to provide much in the way of volatility for FX. Recent commentary from ECB officials, in particular the dovish members have anchored expectations towards no change in asset purchases. That being said, the consensus remains for the ECB to maintain the rhetoric that PEPP purchases over the next quarter will be conducted at a “SIGNIFCANTLY HIGHER PACE”, a phrase that was first introduced in March. The chart below highlights that the elevated PEPP purchase rate equates to EUR 80bln/month.

Recent ECB commentary

• ECB’s Panetta: The conditions that we see today do not justify reducing the pace of purchases, and a discussion above phasing out the PEPP is still clearly premature.
• ECB’s Villeroy: Any hypothesis of a reduction of purchases partly for Q3 or the following quarters is purely speculative.
• ECB’s Stournaras: Sees no reason to change the pace of PEPP purchase programme.

Satisfying the Hawks

While consensus is for the ECB to avoid signalling a taper, ECB hawks would argue a case for altering language around PEPP purchases given the improving backdrop for the Eurozone economy coupled with rising inoculation rates. As such, with the bar set low for a hawkish surprise, a slight tweak in the language to appease ECB hawks could be enough to prompt a modest EUR/USD rise. Another factor to be aware of and what has been a common theme is the potential for ECB sources to be released shortly after the ECB press conference.

US CPI in Focus

Aside from the ECB decision, there will also be focus on the latest US CPI report, which may be the more important data point to spark FX vol.

Trading with Pivot Points

EUR/USD Technical Levels

EUR/JPY Technical Levels