4 min readThe European Central Bank (ECB) has announced its latest interest rate decision, leaving rates unchanged at 2% at the March meeting. This marked the sixth straight meeting where rates were left unchanged. The decision comes as inflation was near the ECB’s 25 target, but as uncertainty rises in light of the Middle East conflict.
The ECB noted that the Iran war and surging oil and energy prices increase uncertainty about the outlook, creating upside risks to inflation and downside risks to growth. The central bank now sees inflation this year at 2.6%, up from 1.9%, while inflation in 2027 is expected to be 2%, up from 1.8%. The central bank said the medium-term impact was less clear as it depends on the duration of the war.
However, the ECB offered no guidance on future steps, repeating its mantra of a data-dependent, meeting-by-meeting approach. Attention will now turn to ECB President Christine Lagarde’s speech, where she will likely repeat that officials are ready to act when needed. The market is pricing in potentially two rate hikes this year, having not expected any change to rates ahead at the end of February.
EURO VS DOLLAR (EUR/USD):
If we take a closer look at the technicals, we can see that the price traded around 1.1485 before the rate decision, and after the decision it continues to consolidate around this level. Despite, today’s bounce, on the 4-hour chart EUR/USD trades in a bearish trend below its falling trendline and 50 SMA. Buyers would need to rise above the 50 SMA and falling trendline at 1.1525 to bring 1.1550 into focus. A rise above here creates a higher high and a more bullish outlook.
EURO STOXX 50 (EUR50):
The EURO STOXX 50 fell further following the ECB rate decision. The index was trading 2.5% lower ahead oft he announcement and has since fallen further to 5585. On the 4-hour chart, the price trades in a bearish pattern, below its 50 SMA and falling trendline. Sellers could llook to test support at 5520, the March low. Any recovery would need to rise above 5670 resistance and the 50 SMA at 5740.
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