EURUSD was higher after the European Central Bank surprised markets by sticking to its planned rate hike.
EURUSD – Daily Chart
The EURUSD has risen on the rate hike but still points to further lows after the sharp drop on Wednesday. Traders could play the short side with a target of 1.0485 and extensive uptrend support below that.
ECB President Christine Lagarde was forced to defend the central bank’s decision to implement a 50bps rate hike after turmoil at US banks and Swiss lender Credit Suisse.
“We think that the banking sector is currently in a much stronger position than it was back in 2008,” she said. “We do have tools and facilities on hand too.”
“Our staff…have demonstrated in the past that they can also exercise creativity in very short order, in case it is needed to respond to what could be a liquidity crisis if there was such a thing. But, this is not what we are seeing,” Lagarde said.
The interest rate hike came after markets rallied on a Credit Suisse bailout of $54bn from the Swiss National Bank. The troubled Swiss lender said it was taking decisive action to shore up its finances after its shares tumbled 30% on Wednesday.
The move to repair Credit Suisse came a few hours after the central bank and the Swiss financial regulator had issued a statement offering emergency funding. They insisted there was no “direct risk” of contagion from the problems seen at US regional banks after the collapse of Silicon Valley Bank.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks,” the Swiss National Bank said.
Traders should position for the EURUSD to continue its losses from Wednesday as investors are wary of the potential for Credit Suisse to complete a healthy turnaround.
Tomorrow will see core inflation data for the Eurozone, which is expected to rise from 5.3 to 5.6%. A lower number may see traders selling the euro on expectations that the ECB will slow down with its recent rate hikes.