– European Central Bank (ECB) to Hold at 0.50%; Forward-Guidance in Focus
– President Mario Draghi Under Pressure to Weaken Euro- Verbal Intervention?
Trading the News: European Central Bank Interest Rate Decision
The European Central Bank (ECB) is widely expected to retain its current policy in November, but the Governing Council may show a greater willingness to further embark on its easing cycle amid the growth threat for deflation.
What’s Expected:
Time of release:11/07/2013 12:45 GMT, 7:45 EST
Primary Pair Impact: EURUSD
Expected: 0.50%
Previous: 0.50%
DailyFX Forecast: 0.50%
Why Is This Event Important:
Indeed, there’s growing bets that the ECB will deliver another rate before the end of the year, but we may see President Mario Draghi implement his own style of ‘verbal intervention’ as European policy makers look for a weaker Euro exchange rate.
Expectations: Bearish Argument/Scenario
Release
Expected
Actual
Euro-Zone Producer Prices (YoY) (SEP)
-0.8%
-0.9%
Euro-Zone Consumer Price Index (YoY) (OCT A)
1.1%
0.7%
Euro-Zone Unemployment Rate (SEP)
12.0%
12.2%
The ECB may have little choice but to implement more non-standard measures as inflation continues to undershoot the 2% target, and the central bank may also look to weaken the single currency in an effort to combat the threat for deflation.
Risk: Bullish Argument/Scenario
Release
Expected
Actual
Euro-Zone Sentix Investor Confidence (NOV)
6.2
9.3
Euro-Zone Trade Balance s.a. (AUG)
11.8B
12.3B
Euro-Zone Retail Sales (MoM) (AUG)
0.2%
0.7%
However, the ECB may preserve its wait-and-see approach amid the bright signs coming out of the economy, and the policy meeting may spur a longer-term rally in the Euro should the central bank talk down bets for more easing.
How To Trade This Event Risk(Video)
*Trading the ECB interest rate decision may not be as clear cut as some of our other trade setups as the press conference with President Draghi ends with a Q&A session
Join DailyFX on Demand for Full Coverage of the ECB Meeting
Bearish EUR Trade: ECB Sees Need for More Monetary Stimulus
Need to see red, five-minute candle following the decision/statement to consider a short Euro trade
If market reaction favors a short trade, sell EURUSD with two separate position
Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is met, set reasonable limit
Bullish EUR Trade: Governing Council to Remain on Sideline
Need green, five-minute candle to favor a long EURUSD trade
Implement same strategy as the bearish euro trade, just in the opposite direction
Potential Price Targets For The Rate Decision
EURUSD Daily
Chart – Created Using FXCM Marketscope 2.0
Retains Bullish Trend; Continues to Close Above Support
Relative Strength Index Turns Around Ahead of 37
Interim Resistance: 1.3530-40 (61.8 retracement)
Interim Support: 1.3455 (50.0 expansion) to 1.3490 (50.0 retracement)
Impact that the European Central Bank Interest Rate Decision has had on EUR during the last meeting
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
OCT 2013
10/02/2013 11:45 GMT
0.50%
0.50%
+55
+65
October 2013 European Central Bank Interest Rate Decision
The European Central Bank stuck to its current policy in October, with President Mario Draghi reiterating that inflation expectations remain ‘firmly anchored,’ but the central bank retained its forward-guidance for monetary policy and pledged to keep rates at present or lower for an extended period of time. Despite the dovish comments, the ECB’s wait-and-see approach propped up the Euro, with the EURUSD climbing above 1.3600 handle, but we saw the single currency consolidate going into the close as the pair ended the day at 1.3578.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
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Source: Daily fx
