Market Analysis

ECB interest rate decision headlines the weekly economic docket

The euro currency comes back into the spotlight this week as the European Central Bank meets to decide on interest rates and future EU monetary policy. Market consensus is currently finely balanced as to whether outgoing ECB President Mario Draghi will announce drastic new accommodative policy measures on Thursday.
The main area of contention for financial markets will be the scale of any new policy measures announced this week, and also the potential change in EU policymakers forward guidance. The urgency has also entered into the conversation where ECB policy accommodation is concerned, with many leading economists calling for policy action now, rather than later.
Dovish rhetoric may leave financial markets wanting, as expectations are high that the European Central Bank will not only introduce lower interest rates this week but crucially pave-the-wave for a potential QE package as soon as November 2019. An article inside a leading German newspaper last Friday cited sources close to the ECB said that the timing of the next QE package is likely to be announced this week.
In six-weeks time the ECB will give their next set of eurozone economic projections, many market commentators are speculating that unless EU growth and inflation pick-up, then QE is almost unavoidable at this point in time. We should also consider that ECB President Mario Draghi is vacating the top job at the ECB in October, he may want to let the incoming Christine Lagarde introduce a new QE package.
The euro currency is extremely likely to see periods of heightened volatility this week if the ECB President delivers or even under delivers. The EUR/USD and EUR/GBP pair both currently sit at critical technical levels leading up to the main event on Thursday.


EUR/USD Candle Chart | Source: ActivTrader

EUR/USD Candle Chart | Source: ActivTrader


The EUR/USD pair could finally break away from the 1.1175 to 1.1285 price range this week, following a period of extended range-bound trading. A break below the 1.1175 level exposes further downside towards the 1.1130 to 1.1050 level. To the upside, a break above the 1.1285 could see the EURUSD pair testing the 1.1360 to 1.1410 resistance areas.


Written by Nathan Batchelor, External Analyst, ActivTrades

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