EURUSD will be bullish before Thursday as traders assume the latest ECB interest rate decision will rise 50bps and keep a hawkish tone.
EURUSD – Daily Chart
The EURUSD has been trapped between the 1.0699 and 1.0807 levels. In contrast, the Fibonacci is 61.8% and 100%, and traders could look to play the range between them ahead of the ECB interest decision on Thursday.
This Thursday’s ECB meeting is critical for the Euro; the hawks control the European Central Bank’s monetary policy. The elevated inflation readings and the new cyclical high in the core rate, while economic activity appears to be picking up, have quieted the resistance by those inclined for more accommodative policy. At the same time, fiscal policy is looking less strict. The Stability and Growth Pact thresholds were suspended due to the pandemic and Russia’s invasion of Ukraine. They are to be enforced again starting next year, but other social goals encourage some flexibility. Formal EC proposals are at least a few weeks away. Still, talk suggests that providing a commitment to reforms and pursuing the EU’s strategic goals (digital transition, environmental sustainability, and expanding defence capabilities) may be considered. This speaks to more customised budget plans, and the creditor countries will need more flexibility.
