The anti-risk U.S. dollar weakened while we saw rebounds across the board Wednesday. The sentiment was lifted yesterday following a report that Ukraine is open to discussing Russia’s demand for neutrality as long as it’s given security guarantees. Volatility is, however, not over, with the outcome of the war in Ukraine still being a big unknown.
Today traders will turn their eyes to the European Central Bank decision and ECB press conference. At the same time, we will have the U.S. inflation data due for release.
What To Expect From The ECB?
While the ECB was already attempting to suppress the market’s rate hike speculation in 2022 before the threat to economic growth from Russia’s invasion began to rise, the new situation will possibly only harden policymakers’ position.
With the implications of the war in Ukraine still uncertain, it will be too early to send a hawkish message this month. While even higher inflationary pressure pushes policymakers toward policy normalization, the duration of the war could delay the exit from the ECB’s expansionary monetary policy.
In short, with chances of a 2022 rate hike tending towards zero, further gains in the EUR/USD pair might be limited.
EUR/USD – A Strong Rebound
Following yesterday’s incredible ‘risk on’ day with the euro’s rise towards 1.11, we may see some bullish extension until approximately 1.1170 before selling pressure accelerates again. Bears will, however, watch out for a fresh decline below 1.0940 to sell euros towards 1.07.
Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumptions of MaiMarFX traders. They are not meant to solicit or recommend buying or selling a specific financial instrument.