Markets muted ahead of ECB announcement

Markets eagerly anticipate the European Central Bank’s rate and policy announcement, ahead of what is expected to be a volatile trading session.

Euro notes
Source: Bloomberg

Euro calms following QE speculation

The EUR/USD pair is currently trading at $1.161, down 0.03% on Thursday ahead of the ECB’s latest interest rate decision, scheduled for 12:45. However it will be the press conference following the data release that will be the focus of markets, as whispers that a round of quantitative easing will begin from March this year – seeing the ECB expand its balance sheet by €50 billion a month into 2016 – is finally to be verified. As news of the possible QE package began to circulate on Wednesday EUR/USD spiked to $1.168, testing the pair’s 200-hour moving average. However, as markets calmed, the pair found support at the 100-hour moving average, and is currently trading at $1.1583.

On a daily timeframe the pair remains oversold, which suggests that we could see a move higher should monetary easing be confirmed in-line with market expectations, with the price re-testing the 200-hour moving average at $1.167. However, should Mario Draghi throw the market a curve ball and downside support of $1.1583 fails to hold, the next clear downside level to presents itself would be $1.1506.

Spot FX EUR/USD chart

BoE rate hawks get their wings clipped

Wednesday’s release from the Bank of England’s Monetary Policy Committee showed nine unanimous votes left interest rates unchanged, with two members reversing their hawkish bias on the back of UK inflation rates falling to a 14-year low. This left GBP/USD relatively mixed, suggesting that any possibility of a rate hike was already far from the market’s mind. The pair has seen a decline of 2.78% in 2015 alone.

Currently trading at $1.515, GBP/USD is up 0.06% during Thursday’s opening session, with any further upside currently being capped by its 200-hour moving average of $1.516. If respected, it could then re-test Wednesday’s low of $1.5075. However, should topside resistance fail to hold, the next clear upside target would present itself at $1.5253.

Spot FX GBP/USD chart

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