As traders and dealers arrive at their desks, the main question on many minds will be whether the European Central Bank opt for a 25 or 50 bps interest rate hike today. Inflation has placed significant levels of pressure on central banks across the globe and has, in some cases, forced them into raising rates a lot faster than they would.
Markets have been expecting a 0.25% hike for many weeks but new reports out this week speculate that the ECB is now seriously considering a larger 0.50% rise. Such a move is not fully priced into the EURUSD pair, which has seen a mild bounce higher after breaking through parity last week.
The ECB announcement should also see confirmation of their newly devised tool which will be utilised to reduce excessive moves in euro area government bond yields as the central bank begin to tighten policy. The announcement is scheduled for 12.45 with the press conference commencing at 1.30. Buckle up – it should be a volatile day!
Written by Viv Savani. 6:37am, July 21st 2022
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