I was just wondering, since the ECB announcement is tomorrow, what does the majority expect the euro to do if the rates go up a quarter of a point or if they raise it half a point? And will it have any direct impact on the dollar?
I was just wondering, since the ECB announcement is tomorrow, what does the majority expect the euro to do if the rates go up a quarter of a point or if they raise it half a point? And will it have any direct impact on the dollar?
As far as I know, if the rise is 0.50 points, the euro should put a good boost up. If it is only 0.25, it is probably already discounted by the market, so there could be a moderate rise of EUR. If there is no rise, the dollar will be strong enough. I hope it will serve you. We are superior beings, we obey no one!
If the ECB raises half-point rates, I think the euro will fly during the first few hours, but I doubt the movement will last long. The euphoria lasts as long as people remember that the eurozone economy is still full of cracks. Also, any rise already comes with dovish speech in the background, so be careful to go in long only by the headline. With a rise of just 0.25, everything should already be discounted. Most likely it is a fast movement of 20-30 pips and then lateral until the officials begin to speak. If there is no rise, the dollar will spit at the euro without regrets. There can be a strong and sustained fall there.
The truth, beyond the number itself, what moves the market the most is the tone of the statement and the press conference after it. You can have a 0.50 rise and still see the euro falling if Lagarde is worried about growth. And on the other hand, a slight hike with a hawkish tone can generate rally. That’s why I don’t operate the news directly. I wait for the first few minutes of chaos, I analyze what they really said and look for cold-headed inputs. Entering the first spike is like getting into a bar fight: it sounds exciting, but you usually end up on the floor.
Many people become obsessed with the number of the rise and forget about the details. There are times when the market has already absorbed the 0.25 or even the 0.50 long before the announcement. So what matters is not the decision, but how institutional investors interpret it. I usually notice how the German bonus behaves 10 years later. If it goes up hard, then I know that the market sees the measure as real hawkish. If it does not move or fall, bad sign for the euro. Those clues tell me much more than any headline.
For me, if they don’t go up at least half a point, the euro goes to the pit. The ECB goes way behind the Fed, and if they don’t get serious, the market will punish them. Inflation is still too high to go with half inks. Now, if they decide to press with +0.50 and also let them see that more rises will come, then yes, EUR/USD could return to the easy 1.1051. But if they come out with their typical bureaucratic ambiguity, we go down with violence.
The key is in the forward guidance. An aggressive climb without promises of continuity is worthless. The market wants to see compromise, not just a symbolic gesture. I will be with my finger on the trigger during the conference. Lagarde has that ability to sink the euro with just a poorly structured phrase. It’s not what they say, it’s how they say it.
The last time there was a sharp rise in rates, the euro rose 50 pips and then plummeted 120 in two hours. The initial reaction is useless if there is no context behind it. The problem with the ECB is that they always come late and badly. When rates go up, inflation is already slowing down. When they do nothing, it is when the market demands action. They go with the pace changed for years.
I don’t expect any of these guys. If they do something useful it will be by accident. The ECB has been the laughingstock of central banks over the last decade. The Fed makes decisions, the ECB takes coffees. So my strategy is clear: observe, not over-react, and enter when the dust has settled. Letting yourself be carried away by emotion with this news is a safe recipe to burn accounts.
What many do not understand is that the reaction of the market does not always have immediate logic. You can have ups and still see a fall because everything was already priced in or out of fear of the slowdown. Operating news is not just reading figures. It is understanding expectations, feeling and institutional manipulation. If you do not control that, you better not come near.
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