Can the ECB Keep the Rate Hike Pace as Eurozone GDP Contracts?

Posted Tuesday, January 31, 2023 by
Skerdian Meta • 1 min read

On Thursday the European Central Bank (ECB) is expected to deliver another 50 bps (basis points) rate hike, after doing so in December, following two 75 bps hikes previously. So, the ECB is anticipated to remain hawkish and keep raising interest rates by 50 bps in the next few meetings according to market expectations.

But, the German GDP showed a 0.2% contraction for Q4 yesterday, which was worse than the 0.0% expected. Today’s Eurozone GDP was expected to contract by 0.2% in Q4, but after yesterday’s disappointing German GDP figures, traders were anticipating a weaker reading in today’s Q4 Eurozone GDP.

EUR/US H4 Chart – The 50 Is Being Broken

A slow reversal is taking place 

EUR/USD has been bullish since October last year, as the FED slowed down with rate hikes and softened the rhetoric. On the other hand, the ECB has been keeping up the hawkish rhetoric, which has kept the Euro in demand. But we might see a pivot by the ECB which they might announce or just hint at on the statement and press conference. So, the Euro is retreating and if the ECB does soften up, then this might be the beginning of another bearish leg for EUR/USD.



EUR/USD Live Chart

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