📆 ECB to announce rate decision at 1:15 pm BST
Monetary policy announcement from ECB is a key market event of the day. ECB will announce rate decision at 1:15 pm BST, and the announcement will be followed by press conference of ECB President Lagarde half an hour later (1:45 pm BST). ECB is not expected to change level of rates today but may offer hints for the future meetings!
What markets expect?
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appMarkets are not expecting European Central Bank to change the level of interest rates at today's meeting. ECB deliver the first rate cut at its previous meeting in June, cutting deposit rate by 25 basis points to 3.75%. However, ECB members have since been quite vocal in their speeches and remarks that there is no need to rush it and back-to-back rate cuts are not the base case scenario. All of 55 economists surveyed by Bloomberg expect ECB to keep rates unchanged today. Money markets price in just a 3% chance of ECB cutting rates today. Pricing for the September 12 meeting suggests an around-80% chance of European Central Bank cutting rates then.
Money markets see a 3% chance of rate cut today and around-80% chance of a cut in September. Source: Bloomberg Finance LP
Inflation still above target but goal in sight
There is a rational for ECB to take it slowly with rate cuts. While inflation has slowed considerably from the 2022 peak, it still remains above central bank's 2% target and the slowdown has been halted recently. Also, wage growth remains elevated, what keeps inflationary pressures up. Having said that, it looks prudent for ECB to stay on hold until September when new economic projections will be released. Also, there will be two more CPI prints released before September meeting, what may and ECB may want to wait for those rather than making a decision in a rush.
Rate surprise is highly unlikely therefore investors will focus on a message ECB will try to send. A clear signal that rates will be cut in September is unlikely but some hints may be offered. Indicating that inflation is moving sustainably to the target and will reach it soon, as well as suggestions that further easing is required will be seen as strong dovish hints. Money markets are currently seeing two more rate cuts this year (September and December), but should ECB strike a dovish note today, markets may start price in possibility of October cut as well.
A look at EURUSD and DE40
EURUSD has been trading in a strong upward move recently, driven mostly by USD weakening. US currency has been losing ground amid rising odds of Fed launching easing cycle in September. The main currency pair climbed to 1.0948 area recently, the highest level since the second half of March 2024. However, gains were halted there and the pair began to trade in a sideways moves as investors wait for hints from ECB. In case of a dovish surprise in ECB message, the near-term support levels to watch can be found at 1.0905 and 1.0880 (23.6% retracement).
EURUSD at H1 interval. Source: xStation5
German DAX futures (DE40) took a hit recently, amid a pullback in global equity markets, especially on Wall Street. German index pulled back from a recent local high of around 18,900 pts and dropped 18,500 pts area yesterday, testing 200-period moving average on H4 interval (purple line). Bulls managed to defend the area and push the price back above the lower limit of bullish channel. However, another attempt at breaking below the lower limit of the channel was made this morning. A dovish message from ECB may support sentiment and help end the correction.
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
