Will The ECB Slash Rates?

As we had expected, yesterday, the euro was bearish and continued dropping ahead of today’s ECB meeting. The euro usually reacts to rumours being circulated in the market; in this case, the euro’s downfall came as a reaction to expectations regarding new extreme measures to be taken by the ECB.

Among the many speculations is that the ECB bond purchase stimulation program might be mentioned in the press conference. The ECB is also expected to keep many measures unchanged; giving them further time to take action. However, any changes made will reflect highly on the Forex market and particularly on the EUR/USD and other major currencies. In this case, the EUR/USD might reach 1.2050 today.

However, by observing the worldwide conditions, the ECB might think out of the box and unexpectedly slash the interest rate once again.

Here are the major Resistance (R) & Support (S) levels of the EUR/USD:

S2 S1 Pivot Point R1 R2
1.2050 1.2274 1.2300 1.2350 1.2450

As for today’s figures, starting from the UK, Bank of England’s (BOE) monetary policy committee members will vote on the interest rate.

Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

Ø Forecast: 0.50%
Ø Previous: 0.50%

A higher than expected rate is positive for the GBP, while a lower than expected rate is negative for the GBP.

Concerning the Euro’s data, the six members of the European Central Bank (ECB) Executive Board and the 16 governors of the euro area central banks will also vote on the interest rate.

Ø Forecast: 0.05%
Ø Previous: 0.05%

A higher than expected rate is positive for the EUR, while a lower than expected rate is negative for the EUR.

This will be followed by the most important event for the day, the European Central Bank (ECB) press conference. It is a monthly press conference held 45 minutes after the Minimum Bid Rate announcement. This conference is an hour long and divided to two parts. First, a prepared statement is read, and then the conference is opened to press questions.

The press conference examines the factors which affected the ECB's interest rate decision and deals with the overall economic outlook and inflation. Most importantly, it provides clues regarding the future monetary policy.

High levels of volatility can be observed during the press conference as press questions lead to unscripted answers.

Moving to Canada, the Ivey Purchasing Managers Index (PMI) is scheduled for release, measuring the activity level of the purchasing managers in Canada. A reading above 50 indicates an expansion in the sector; while a reading below 50 indicates a contraction in the sector.

Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of the overall economic performance.
Ø Forecast: 53.2
Ø Previous: 51.2

A higher than expected reading should be taken as positive for the CAD, while a lower than expected reading should be taken as negative for the CAD.



Disclaimer: The prices and news mentioned in this outlook are absolutely no guarantee of future market performance. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss. Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.