Euro steady awaiting major rate decision

The Euro has steadied against the greenback as we get ready to enter today’s European trading session as traders await one of the biggest news releases of the week which is the latest interest rate decision by the European Central Bank

In yesterday’s trading session the European currency accelerated dramatically to near 1.0820 after the United States Producer Price Index (PPI) data came in below expectations.

Monthly headline PPI contracted by 0.3% against analysts expectations for a figure of 0.1%. Annualized headline PPI has fell to 1.1 percent vs consensus for a number of 1.5 percent and the prior release of 2.3 percent.

Contrary to that, US monthly core PPI has maintained its pace at 0.2 percent as expected by the market participants. The annualized core PPI decelerated to 2.8 percent against the expectations of 2.9 percent and the former release of 3.1 percent.

The biggest news of the day was the decision by the US Federal Reserve to keep interest rates on hold which was predicted by nearly 50 percent of market participants although the US Central bank did leave the door open for a rate hike in March.

Looking further ahead today, the main driver of the EUR/USD currency pair will be the rate decision by the ECB and a rate rise of 25 basis points is a near certainty which means all the focus will be centred around the following monetary statement for clues on any further rate hikes.

Analysts from Deutsche bank the European Central Bank is not done with rates yet and believe one more rate hike will be delivered before they call it a day.

“We expect the ECB to hike 25 bps to 3.50%. Several Governing Council members have signalled quarter-point hikes in June and July, consistent with our baseline expectation for a terminal rate of 3.75% in July. On the whole, we expect the message to tilt hawkish. We expect the ECB to emphasize the high level and persistence of underlying inflation and ongoing upside risks to inflation despite the recent declines and some forecast revisions. We expect the ECB to leave the possibility of a terminal rate above 3.75% on the table and to encourage the market to price out some of the 2024 rate cuts” they said.