ECB Interest Rate is done in 2 parts, first with the rate decision at 7:45am then followed with a press conference at 8:30am. The most important part of the rate decision is the Press Conference, which is going to be the main focus as onsite media members could blindside Draghi and market will react sharply to his response. With market focusing on potential increase in the monthly QE program and the outcome for Greek 3rd bailout, we should have plenty of reasons to see EUR volatility.
Here’s the forecast:
7:45am (NY Time) EU ECB Interest Rate Decision Forecast 0.05% Previous 0.05%
Deviation: 0.05% (SELL EUR 0.00% | N/A)
The Trade Plan
EU ECB Interest Rate decision comes in two part, the first one is the 7:45am rate announcement followed by the 8:30am Press Conference where ECB chief Draghi issues the official statement on this rate decision. Since it is extremely unlikely to get a surprise from ECB (we stand corrected as Draghi has surprised the market twice during his first three rate meetings), there is usually no volatility following this release.
However, in the unlikely event that ECB surprises the market by cutting rates again, then expect market to go into a selling frenzy and we should jump in immediately on a spike trade because no matter what the slippage or spread is, we will end up making positive pips. Of course, if ECB decides to keep rates unchanged to as expected at 0.05%, then we should see relatively no change in the market as this lack of move is expected… Please follow the recommendations above ONLY if ECB surprises the market.
I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: EUR/USD.
Outlook Score
Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.
Definition
The rate at which the European Central Bank (ECB) charges banks in EU member states to borrow money. The minimum bid rate is an important tool in the ECB’s monetary policy and changes in this rate affect other interest rates in the EU banking system. The Minimum Bid Rate is also the The lower limit to the interest rates at which counterparties may submit bids in variable rate tenders.; The Main Refinancing (Refi Rate) is the rate on the main refinancing operations, often referred to as the refi rate. The level is determined by the ECB Governing Council. The Deposit Rate is the Interest rate at which credit institutions may at all times place overnight deposits with the national central bank. The deposit rate is normally 100 basis points below the minimum bid rate, thereby setting a lower limit on short-term money market rates.