The EUR/USD is holding steady in the run-up to the ECB’s interest rate decision.
Analysts expect the bank to leave interest rates unchanged and promise to do more.
The decision comes as the number of coronavirus cases continues to rise.
The EUR/USD exchange rate is rising slightly as traders digest the soaring number of Covid 19 cases in Europe and the new restrictions. They are also waiting for the ECB’s interest rate decision. It is trading at 1.1750, which is above this week’s low of 1.1718.
EUR/USD steady ahead of ECB decision
Hard time for Europe
For months, Europe has been making significant progress in dealing with the coronavirus pandemic. At some point, many countries have even begun to partially open their borders.
Recently, however, the situation has changed and the region is now on the defensive. With the onset of winter, many countries, including France, Germany, Italy, Spain and Belgium, have begun to report an increase in cases.
Yesterday, Germany confirmed more than 14,000 new cases, which is the highest number ever recorded. France recorded more than 33,000 cases, bringing the total to over 463,000. Spain also confirmed more than 18,000 cases.
Worse still, health experts expect the situation to deteriorate further, mainly because of the general cold season. They also attribute this to the fact that governments are reluctant to introduce comprehensive freezing measures, as was the case in the first quarter.
Thus, Angela Merkel said yesterday in a statement that the government will demand that all restaurants and bars close by the end of the month. In return, the government would pay them back more than 10 billion euros. Macron also announced only partial closures in France.
So since there is no vaccine in sight, there is a possibility that the region will go through another recession in the fourth quarter.
ECB decision imminent
The EUR/USD pair will respond to the ECB’s interest rate decision, which will be released later today. Analysts surveyed by Reuters expect the bank to leave interest rates and its program of quantitative easing unchanged. This will be in line with what the Bank of Japan did today and the Bank of Canada yesterday.
In particular, analysts expect that Christine Lagarde will reassure the market that the bank was willing to do everything possible to support the economy. Among the measures she still has at her disposal are expanding the scope of asset purchases and even further rate cuts.
To cope with the pandemic, the bank has lowered interest rates, launched a 1.35 trillion QE program and agreed to accept bonds as collateral even for fallen angel companies.
It could also follow in the Fed’s footsteps and say that the bank will not raise rates even if inflation rises above 2%. However, since the economy is in a “low inflation trap”, this will have no immediate effect.
The EUR/USD exchange rate will also react to German employment and inflation data, as well as consumer and business confidence data in the Euro-Zone.
EUR/USD Technical Outlook
Technical Table EUR/USD
The four-hour chart shows that the EUR/USD pair is slightly above this week’s low. It has also found strong resistance at the 61.8% Fibonacci retracement level. It also completes the fourth wave of the Elliot Wave Pattern and the center line of the Donchian Channels. Therefore, I suspect that the pair will resume the downtrend as part of the fifth Elliot wave. Start with our free forex trading courses.