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ECB Keep Interest Rates Unchanged and Confirms Inflation Predictions

During this morning’s Asian and European sessions, the EURJPY is experiencing significant and unmistakable price movements. Conversely, the EURUSD has the lowest spread and swap fee, plus is likely to maintain volatility owing to upcoming economic releases which are related to the US employment sector. Currently, the EURUSD is retracing towards the previous day’s breakout level without breaking below it, suggesting a lack of definitive downward momentum favoring the Dollar. Though investors should note the price can swing and change once the ECB president speaks to journalists.

Moreover, assessments based on Moving Averages and Oscillators indicate that the exchange rate remains within the buy zone, encompassing indicators such as the 75-bar EMA, 100-bar EMA, and RSI. However, trading below the VWAP signals a selling opportunity for the day, despite the ongoing downward momentum. The trajectory of the trend will heavily rely on tomorrow’s US employment data.

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Regarding the Euro, heightened volatility is anticipated when ECB President Lagarde holds a press conference and engages with journalists directly. The monetary policy statement forecasts inflation to surpass the target in 2024, primarily attributed to wage growth. Nonetheless, economists highlight that the inflation forecast remains subdued compared to other regions.

Short-term traders should consider not only the ECB president’s statements but also market sentiment, as they often diverge. Bloomberg analysts suggest the ECB will likely maintain lower rates over the next three years. However, investors should remain vigilant as price action could shift during Lagarde’s press conference.

For the US Dollar, the price will of course be determined by tomorrow’s NFP data and salary growth. It is also worth noting the yesterday publication of the US Federal Reserve’s “Beige Book” report. According to report, stable or growing business activity was recorded in 11 out of 12 financial districts, which makes officials’ caution justified, since the risks of accelerating inflation remain. In this regard, it is worth noting the comments of the President of the Federal Reserve Bank (FRB) of Minneapolis, Neel Kashkari, who said that strong economic growth could limit the number of adjustments to borrowing costs this year to two or even one.

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Michalis Efthymiou
HFM’s Market Analyst
Michalis Efthymiou brings over 9 years of extensive experience in the financial services industry across the United Kingdom and Europe. Initially serving as a financial advisor in London for 5 years, he has transitioned into the field of market analysis over the past 4 years.
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