{"id":61622,"date":"2023-09-16T00:03:17","date_gmt":"2023-09-16T04:03:17","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/ecb-in-dovish-hike-ahead-of-more-central-bank-action-next-week\/"},"modified":"2023-09-16T00:03:21","modified_gmt":"2023-09-16T04:03:21","slug":"ecb-in-dovish-hike-ahead-of-more-central-bank-action-next-week","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=61622","title":{"rendered":"ECB In Dovish Hike Ahead Of More Central Bank Action Next Week"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<p><em>Before yesterday\u2019s ECB meeting, there was a bit of uncertainty about whether the ECB would hike or not, with markets pricing in a 65% implied probability of a 25-bps hike.<\/em><\/p>\n<p>In the end, it went ahead with the rate<span class=\"paywall-full-content invisible\"> hike, lifting the main refinancing rate to 4.50% from 4.25% previously. But the euro nonetheless fell sharply. This is because the ECB strongly indicated that we have reached a terminal interest rate, meaning no more hikes are likely moving forward.<\/span><\/p>\n<h2 class=\"paywall-full-content invisible\"><strong>EUR\/USD Outlook Bearish as Rates at \u2018Sufficiently Restrictive Levels\u2019: ECB<\/strong><\/h2>\n<p class=\"paywall-full-content invisible\">As per the policy statement, the \u201cECB considers that key rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target. Future decisions will ensure that the key rates will be set at sufficiently restrictive levels for as long as<span class=\"paywall-full-content no-summary-bullets invisible\"> necessary.\u201d<\/span><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The ECB is worried about the path of growth more than the inflation outlook. While rising oil prices may keep global inflation elevated, the ECB\u2019s aggressive tightening is impacting demand, as we have witnessed in recent data releases in Germany and the Eurozone.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">A weakening economy should ensure to bring inflation back down to the target in the medium term, especially when interest rates are now \u201cat sufficiently restrictive levels.\u201d<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Accordingly, the ECB has cut its growth forecast for 2023 and 2024, while increasing its inflation projections slightly.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The ECB:<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>Cuts 2023 GDP growth from 0.9% to 0.7%<\/li>\n<li>Cuts 2024 GDP growth from 1.5% to 1.0%<\/li>\n<li>Raises 2023 Inflation to 5.6% from 5.4%<\/li>\n<li>Raises 2024 Inflation to 3.2% from 3.0%<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Moving forward, investors will be keeping a close eye on incoming data to gauge how long rates will be held at these levels. But until such a time that the trend of US data starts to deteriorate sufficiently enough to cause the dollar to reverse its bullish trend, the EUR\/USD should remain in an overall bearish trend.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\"><strong>EUR\/USD Could Breakaway low<\/strong><\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Thus, a break below the May low of 1.0635 still looks likely for the EUR\/USD. Even if rates bounce back somewhat, I will maintain a bearish view of this pair until the charts tell us otherwise.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Key resistance is seen around the 1.0765-75 area, which was previously supported. This area has held for now. The EUR\/USD will need to reclaim this tower to tip the balance back in bull&#8217;s favor slightly.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">But that won\u2019t be enough without a higher high above 1.0945 for confirmation. On the downside, the next major target below the May 2023 low of 1.0635 is probably at 1.0500. But we will cross that bridge if and when we get there.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/09\/saupload_tradingidea61621-1.png\" alt=\"EUR\/USD chart\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Source: TradingView.com<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\"><strong>US Dollar Extends Rise Ahead of FOMC<\/strong><\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The focus will remain on the US dollar, with more data releases and the Fed\u2019s decision to come next week.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">A day after US CPI inflation came in slightly hotter than expected in August, PPI was also a touch stronger on the headline front at 1.6% y\/y vs. 1.2% expected, although core PPI was in line at 2.2% y\/y.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The fact that retail sales (+0.6%) and unemployment claims (220K vs. 226K expected) also both came in better than hoped today means there is more reason why the Fed will maintain a contractionary policy in place for even longer.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">On Friday, we will have more US data to look forward to in the form of the Empire State Manufacturing Index, industrial production, and UoM Consumer sentiment survey, followed on Tuesday by building permits and housing starts.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Unless we see significantly weak numbers, the broad dollar strength should remain in place as we head into the Fed\u2019s meeting on Wednesday.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This week\u2019s most positive data and hotter inflation print has given rise to speculation that the Fed\u2019s tightening cycle is not over just yet. While no policy changes are expected at this FOMC meeting, traders will be looking for it in regard to the next meeting.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">If there\u2019s a strong inclination in the policy statement, dot plots, and\/or Powell\u2019s press conference towards a final hike before the year is out, then this should support the dollar.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\"><strong>Next Week\u2019s Macro Highlights Include FOMC, BOE and Global PMIs<\/strong><\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The economic calendar is full of key market-moving data next week, so expect lots of volatility in the EUR\/USD and other forex pairs. Here are the main ones to keep an eye on:<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>Canadian CPI (Tuesday)<\/li>\n<li>US Building Permits and housing starts (Tuesday)<\/li>\n<li>New Zealand GDP (Thursday)<\/li>\n<li>UK CPI (Wednesday)<\/li>\n<li>FOMC policy decision (Wednesday)<\/li>\n<li>SNB rate decision (Thursday)<\/li>\n<li>BOE rate decision (Thursday)<\/li>\n<li>US jobless claims, Philly Fed and existing home sales (Thursday)<\/li>\n<li>BOJ policy decision (Friday)<\/li>\n<li>Global PMIs (Friday)<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Originally published on MoneyShow.com<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Editor&#8217;s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Editor&#8217;s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4635541-ecb-in-dovish-hike-ahead-of-more-central-bank-action-next-week?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Before yesterday\u2019s ECB meeting, there was a bit of uncertainty about whether the ECB would hike or not, with markets pricing in a 65% implied probability of a 25-bps hike. In the end, it went ahead with the rate hike, lifting the main refinancing rate to 4.50% from 4.25% previously. But the euro nonetheless fell [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":23780,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-61622","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>ECB In Dovish Hike Ahead Of More Central Bank Action Next Week | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Before yesterday\u2019s ECB meeting, there was a bit of uncertainty about whether the ECB would hike or not, with markets pricing in a 65% implied probability\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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