Euro Remains Volatile Ahead of ECB’s Policy Rate Decision, High Volatility Likely in Euro Against Major Peers; July 21, 2022

ECB’s Interest Rate Decision

Today the key event from the Euro Zone will be ECB’s Interest Rate Decision scheduled at 1215 GMT followed by Press Conference at 1245 GMT. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation. Short term interest rates are the paramount factor in currency valuation. The 6 members of the ECB Executive Board and 15 of the 19 governors of the Euro area central banks vote on where to set the rate.

In today’s ECB Meet, there is a strong consensus that ECB will hike rates by 25 bps to 0.25 pct. In the latest statements revealed by Board Members yesterday that a 50bps would at least be discussed, adding some uncertainty to the outlook. On the other side, most of the attention appears to be on the so-called “ANTI-FRAGMENTATION” package that is expected to be announced along with the interest rate decision. A new tool is designed to ease fears of a fresh debt crisis.

During the past month, Italy’s 10-year bond yield crossed the 4% mark — with one economist saying these levels “could eventually turn into a problem” for the south European nation. To tackle this issue, ECB is coming up with the new tool. Important to note here that, Draghi’s government is set to fall as three key parties failed to support him in a confidence vote, sending Italy into months of political uncertainty too and such turmoil may complicates ECB’s fragmentation tool.

Keep an eye open to watch out what comes out from the ECB’s Monetary Policy Statement and how the markets react if any new tool information disclosed.

Let’s see how Euro has reacted during the previous data release:

June 09:

April 14:

Technical View:

EUR/USD:

• The euro remains volatile ahead of ECB’s Interest Rate Decision due at 1215 GMT.
• Today the pair made intraday high at $1.0230 and low at $1.0173 mark.
• Today triple EMA on a day chart and H1 chart suggest bearish trend for the time being.
• A consistent close above $1.0230 on H1 chart requires for the upside rally.
• Alternatively, a sustained close below $1.0172 on H1 chart will check further supports.

Take a look and do trade wisely!
Good Luck