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The ECB is expected to hold rates steady in this meeting

EUR/USD Remains Bullish Today AS ECB Presses on Strong Rate Hikes

Posted Thursday, September 29, 2022 by
Skerdian Meta • 2 min read

The ECB is expected to hold rates steady in this meeting

EUR/USD has been on a strong bearish trend, particularly this month, despite the European Central Bank (ECB) starting to raise interest rates in the last meeting. The pair fell below parity and got close to 0.95 yesterday in the early hours o the morning, before the bullish reversal higher.

Earlier today EUR/USD was showing a more bearish bias as it moved away from 0.9700, reinforcing the expectations of continuing the bearish trend for the rest of the day, with targets 0.9550 level as the next main station, while according to Wells Fargo, the EUR/USD could fall to 0.91 by the first quarter of next year. They point out that the European Central Bank will lag well behind the Federal Reserve and also consider that economic conditions in the Eurozone are worsening.

Although in the last two days we have seen some bullish momentum and today the 20 SMA (gray) held as support. The ECB members are making some hawkish comments on rate hikes again which is helping the sentiment further.

EUR/USD H4 Chart – The 20 SMA Turns Into Support

Resuming the bullish momentum again today

Remarks by ECB policymaker, Gediminas Simkus

My choice would be (to hike by) 75 bps
A couple of options may be on the table but 50 bps is the minimum

The data in the next couple of weeks will be vital in settling this debate and the first set of inflation figures from Germany and Spain today will also figure into the equation. Considering the expectations, it seems likely that ECB policymakers may lean more towards a 75 bps rate hike – so long as they can get away with it still.

ECB’s Olly Rehn Speaking

Significant rate hikes are needed in the coming meetings
‘Significant’ could mean 50 bps or 75 bps in October
Frontloading in July and September has been justified
Expects the ECB to get to neutral rate by Christmas

This just echoes Lagarde’s remarks earlier in the week when she said that the ECB will still have to raise rates for the next ‘several’ meetings. A better question would be where exactly does Rehn see the neutral rate as being?

Eurozone September Final Consumer Confidence

September final consumer confidence -28.8 points vs -28.8 prelim
Economic confidence 93.7 points vs 95.0 expected
Prior 97.6; revised to 97.3 points
Industrial confidence -0.4 points vs -1.0 expected
Prior 1.2; revised to 1.0 points
Services confidence 4.9 points vs 7.0 expected
Prior 8.7 points; revised to 8.1

Euro area economic confidence falls sharply in the latest monthly reading to its lowest since November 2020, owing to another jump in inflation expectations. The reading for the latter moved up from a revised 37.0 in August to 41.3 in September – posting its first mark higher since March.