- The ECB will likely continue raising interest rates even as the economy slows.
- The ECB raised interest rates to their highest level in 22 years.
- ECB’s Kazaks pushed back against market speculations about ECB rate cuts.
Today’s EUR/USD outlook is bullish. On Tuesday, ECB policymaker Martins Kazaks stated that the European Central Bank would likely continue raising interest rates even as the economy slows down, citing persistently high inflation.
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Notably, economic surveys for the Eurozone and Germany have shown weakness. This is due to increased borrowing costs and China’s underwhelming economic performance after the relaxation of COVID restrictions.
Still, Kazaks, the Latvian central bank governor, expressed his belief that the Eurozone economy would experience a slowdown or stagnation rather than a contraction. According to him, this should not deter the ECB from its efforts to combat high inflation.
Earlier this month, the ECB raised interest rates to their highest level in 22 years. Furthermore, it indicated that another rate hike in July, the ninth consecutive one, was almost certain. This is because inflation is expected to remain above the 2% target until 2025.
Kazaks joined a growing faction of policy hawks who anticipate the upcoming rate hike in July will not be the final one. Additionally, he argued that the risks associated with taking insufficient action outweighed the risks of being too aggressive.
Moreover, Kazaks pushed back against market speculations about rate cuts by the ECB in the first half of next year. He emphasized that the first rate cut would occur “much later” than the market anticipated.
EUR/USD key events today
Investors are awaiting several major economic releases from the US. These include building permits, core durable goods orders, CB consumer confidence, and new home sales. These releases will show the state of the US economy.
EUR/USD technical outlook: Bulls fight to resume the bullish trend.
On the charts, the EUR/USD is on the brink of a break above the 30-SMA. This comes after the price bounced off the 1.0851 support level and broke above the 1.0900 resistance level. Additionally, the price is currently at a pivotal level, where the bias could go either way.
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Therefore, if bulls break above the SMA and the RSI is above 50, the bias will turn bullish, allowing the price to retest 1.1000. However, if the price respects the 30-SMA as resistance, the bearish bias will continue with a break below the 1.0851 support.
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Saqib Iqbal
