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ECB Delivers 25bps Hike Leaving the Door Open for Further Hikes, EUR/USD Slides

ECB Delivers 25bps Hike Leaving the Door Open for Further Hikes, EUR/USD Slides

Zain Vawda, Analyst
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ECB Rate Decision Key Points:

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The European Central Bank has raised interest rates by 25bps in line with expectations. No surprise here as recent data from the Bank Lending Survey did show some signs that tightening is beginning to filter through the economy. The Central Bank confirmed that incoming information broadly supports the assessment of the medium-term inflation outlook that the ECB formed at its previous meeting.


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The ECB stated that moving forward policy rate decisions will continue to be based on its assessment of inflation outlook, considering incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission. Underlying price pressures remain a concern for the ECB as who maintain that the inflation outlook has remained too high for a longer period than the central bank is comfortable with.

On the APP front the ECB mentioned that the portfolio is declining at a measured and predictable pace, as the Eurosystem does not reinvest all the principal payments from maturing securities. The decline will amount to €15 billion per month on average until the end of June 2023 with the Governing Council expecting to discontinue reinvestments as of July 2023.

The ECB Press Conference Will Follow Shortly.


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The rate hike path for the European Central Bank (ECB) has been made all the more murkier moving forward along with its Central Bank peers. Market Pricing suggests that a further 25bps hike may be a reality for the ECB at its next meeting with policymaker Holzmann touting a 50bps at today’s meeting. This follows similar comments by ECB policymaker Isabel Schnabel as well while comments today suggest the ECB may not be done on the rate hike front.

The recent inflation print showed stickiness once more however there are signs that the ECB tightening cycle is starting to have the required impact in other sectors of the economy. Recent data released by the ECB Bank Lending Survey showed a weaker demand for loans, tighter credit standards by banks and weaker loan growth. The above data suggests we should continue to see a weakening in growth and demand in the Euro Area in the months ahead.


EURUSD Daily Chart


Source: TradingView, prepared by Zain Vawda

EURUSD initial reaction saw a 40 pip drop as we approach the ECB press conference. The drop is surprising given the ECB haven’t ruled out further hikes in 2023. The bigger picture for EURUSD continues to favor bulls as we remain within the ascending channel.

The RSI on the weekly timeframe however is in overbought territory as we approach the current yearly highs. Looking at it from a multi timeframe perspective we could be in for further short-term appreciation before a deeper pullback toward the 1.0900 level may come into play.

Key Levels to Keep an Eye on:

Resistance Levels



Support Levels



--- Written by Zain Vawda for

Contact and follow Zain on Twitter: @zvawda

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.