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ECB Preview: EUR/USD Price Action Set-Up on ECB Latest

ECB Preview: EUR/USD Price Action Set-Up on ECB Latest

Justin McQueen,
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ECB, EUR Price Analysis & News

  • ECB Policy Expected to Remain Unchanged
  • Focus on Bond Schedule & Sequencing Guidance

LIVE ECB COVERAGE: We will be providing live coverage of the ECB from 13:15BST. Providing a recap of the decision and covering the ECB press conference.

OVERVIEW: The main event of today’s session will be the ECB monetary policy decision. Now while monetary policy settings are expected to remain unchanged, focus will be on potential changes in the accompanying statement for any hawkish hints.

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As a reminder, the ECB stepped up its hawkishness at the prior meeting having opened the door to ending net asset purchases sooner. This happened through providing a monthly bond schedule of EUR 40bln in April, EUR 30bln and EUR 20bln in June. In turn, this would be the first point of call to gauge whether the ECB are more hawkish, which would be the case if the bond schedule is altered to finish sooner. An example would be a schedule of EUR 40bln in April and EUR 20bln in May, naturally, this would open the door to a Q3 rate rise.

What’s more, the ECB also dropped the pledge to end net asset purchases “shortly” before a rate rise, switching to “some time after”, which ECB’s Lagarde said could mean weeks or months in order to provide flexibility. As such, another change to the sequencing guidance will also be closely watched.

However, it is important to note that the prior ECB meeting took place at the beginning of the Russia-Ukraine war. Therefore, with more time to digest the potential impact, the fear of stagflation in the Euro Zone has increased, which could see the ECB offer a more cautious stance. Keep in mind, that it was only last week that source reports did the rounds, noting that the ECB is crafting a crisis tool to activate if bond yields jump, more specifically referring to peripheral spreads. They also stated that the bank had yet to decide if the backstop would be unveiled pre-emptively. Now while this is at the stage of being designed by staff, to me, this is not exactly a ringing endorsement for another hawkish shift. Therefore, setting the stage for today’s meeting to be a disappointment for hawks.


As it stands, money markets are forecasting the ECB to exit NIRP by year end. As mentioned above and unlike the Fed, ECB monetary tightening is less assured given the current backdrop of rising stagflation risks. Inflation pressures have been exacerbated by the Russia-Ukraine war, however, growth risks are also increasingly tilted to the downside, leaving the ECB on a tricky path to normalise policy while also avoiding a hard landing.

ECB Rate Expectations

Source: Refinitiv

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Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 2% -4% -1%
Weekly -6% 22% 5%
What does it mean for price action?
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Over the last 24hours, the Euro has recovered from 1.08 to reclaim 1.09 amid potential short-covering, suggesting some traders are gearing up for another hawkish surprise. However, this does leave the Euro vulnerable to a pullback should the statement remain unchanged. According to the options market, the implied move for EUR/USD is 54pips. On the topside, resistance is situated at 1.0950-70, which marks recent breakdown in the pair, stemming from Fed Brainard’s hawkish speech and 1.1000 above. Meanwhile, support resides at 1.08.


Source: Refinitiv

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