- ECB Policymakers are open to a 75bps rate hike at the next meeting.
- Eurozone inflation might be months away from its peak.
- Markets expect ECB’s deposit rate to hit 2% by year’s end.
Today’s EUR/USD forecast is slightly bullish as investors react to hawkish statements from ECB policymakers. Policymakers agreed on Wednesday that the European Central Bank might need to increase interest rates by 75 basis points at its meeting in October and once more in December to a level that no longer stimulates the economy.
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The ECB increased interest rates by 125 basis points throughout its last two meetings, the quickest rate of policy tightening ever. However, inflation may still be months away from its peak, suggesting that the bank will continue to tighten policy even more.
“I have to say that 75 bps is a very good candidate for (our next move to) maintain the pace of tightening, but it is also necessary to wait for fresh data,” Slovak central bank governor Peter Kazimir told a news conference.
In an interview with Bloomberg TV, Austria’s central bank governor and outspoken policy hawk Robert Holzmann supported a 75 basis point hike, claiming that 100 basis points would be excessive.
Markets expect the ECB’s current deposit rate of 0.75% to increase to 2% by year’s end and then to about 3% the following spring.
EUR/USD key events today
Investors will be listening to speeches from several policymakers from the ECB and the FOMC later in the day. There will also be a GDP report from the United States showing the change in growth in Q2. This will show whether the economy is heading for a recession. Finally, there will be the initial jobless claims report from the US.
EUR/USD technical forecast: Bulls struggling to keep prices above 0.9701
Looking at the 4-hour chart, we see the price trading at 30-SMA and RSI near 50. This signifies that bears and bulls have equal strength and are fighting to see who will win. After the price failed a second attempt at breaking below 0.9550, bulls took over and showed a lot of strength.
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However, they face strong resistance from the 30-SMA and the 0.9701 resistance levels. If the price fails to go above this zone, we might see it retesting 0.9550. A break above might be the beginning of a bullish trend.
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Saqib Iqbal
