BoE and ECB rate decisions in focus after the Fed hikes rates

EUR/USD=> The pair falls to 1.0650 

S&P500 =>The index rises to 4000

GBP/USD=> The pair falls below 1.24

EUR/USD falls with the ECB rate decision in focus

EUR/USD is falling on Thursday, snapping a three-day winning run ahead of the ECB interest rate decision. The central bank is widely expected to raise interest rates by 50 basis points to take the benchmark lending rate to 2.5%. This comes after two straight meetings of 75 basis point hikes and as the ECB continues to fight against double-digit inflation. Inflation in the eurozone is showing some signs of cooling as it eases from a record high in October. However, it remains 5 times the ECB’s target level, which still makes some policymakers nervous and leaves the door open to a hawkish surprise from the ECB.

Where might the EUR/USD price head to?

EUR/USD is edging lower but still trades in a rising channel dating back to late October. The RSI supports further gains while it remains out of overbought territory. The 100 sma is crossing above the 200 sma in a bullish signal. Buyers could look for a rise over 1.0695, the weekly high, to extend the bullish trend to 1.0790 the June high, and 1.0940, the mid-April high. On the downside, support could be seen at 1.06, the December 5th high, with a break below here exposing the 100 sma at 1.0420.

S&P500 rises after Fed-inspired losses

S&P500 is rising after losses in the previous session after the Federal Reserve raised interest rates by 50 basis points, in line with forecasts after four straight 75 basis point hikes. The move takes the benchmark rate to 4.5%, its highest level in 15 years, as the Fed continues to battle high inflation. The expected terminal rate was pushed higher to 5.1%, suggesting that the US central bank will keep hiking rates for longer, which boosted the USD and sent lower stocks and bonds. In the press conference, Fed Chair Powell acknowledged that inflation had cooled but that it was important to keep the fight against inflation going so higher inflation expectations don’t become entrenched. Looking ahead, the market mood remains cautious as investors look toward US retail sales and jobless claim data due later today.

GBP/USD slips ahead of BoE rate decision

GBP/USD is falling a few ticks lower, snapping a 6-day winning run as investors continue digesting the Federal Reserve interest rate decision and as they look ahead to the BoE rate decision. The UK central bank is expected to raise interest rates by 50 basis points taking the benchmark lending rate to 3.5%, as it fights elevated inflation as the UK economy heads for a recession. This means that last month’s 75 basis point hike, the largest in over three decades, was likely a one-off rather than the start of a new norm. There could be a big division within the nine policymakers as inflation, which eased to 10.7% YoY in November, is still over five times the BoE’s target, and as the UK economy is set to fall into a recession this quarter which could last most of 2023.

Support for the pair could be seen at 1.2350 (December 5 high) and 1.2130 (200 sma).

Resistance could be seen at 1.2440 (weekly high) and 1.25 (round number).

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