Skip to content

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

ECB rate decision expected, but was it the right decision?

While some are fearing that we are staring down the barrel of a loaded gun full of shot from the banking sector, the European Central Bank has gone ahead with a 50-basis point rate rise.

Video poster image

Some economists are concerned that with the current fragility of the banking system it may have been a better outcome to have halved the rate rise.

However, as IGTV’s Jeremy Naylor explains, this may have ended up with more questions than would otherwise have been the case, such as, "what does the European Central Bank (ECB) know that we do not?"

Questions aside, the baton has now been passed to the Federal Reserve (Fed) next Wednesday and the Bank of England (BoE) on Thursday.

(Video Transcript)

ECB delivers as expected

So, despite the troubles brewing in the banking sector, the European Central Bank (ECB) has delivered what it promised it would deliver. And that is a 50-basis point (bp) increase in interest rates, thus sticking to its goal of fighting inflation despite the financial turmoil caused recently by US bank failures and worries on this side of Atlantic about what's going on with Credit Suisse.

Credit Suisse

The Credit Suisse issue has been sidelined for the moment because of the offer of what was effectively a blank check yesterday by the Swiss National Bank (SNB) for the Swiss lender. But that only goes so far. We've heard that 50 billion Swiss Francs worth of support has been taken by Credit Suisse and that is on a loan of course. So that has got to be paid back at some point. And if it has to be paid back, it's because the bank then becomes a success again. And we've seen a lot of troubles for this bank in particular, worries are that it could well see contagion.

Now, part of this banking crisis means that we've seen some of the central bank's jobs done for it in terms of the likely moves up in inflation, which would doubtless. Now, if there is any more upside it will be muted because of what we've been seeing from the banking sector.

DAX

Let me just bring up a chart of the German DAX. Because in today's session, we've seen a new lower low and we've been supported by this rising blue line here, which is the 100-period moving average just below where we are at the moment of 14,864.

Now, the point I want to make here is the fact that I think more than likely that we're going to get a trade that takes us down to this next line of support at 13,695. Now, a lot of water will have to pass under the bridge before we get to that point. But I don't see, technically, much here to support the markets on its way down, around about that, sort of we got this red line here, which is the 200-day moving average.

You got the MACD pointing low, which indicates to me that people are looking for reasons to sell this market, looking at price, good pricing to get in on a short trade on the German DAX.

As I said, the European Central Bank did what was expected of it and raised interest rates by 50-basis points. It really was a question of do it or suffer the consequences, I think more than anything else. If they had not done it, people would then be asking what the European Central Bank members know that we don't, about the outlook anyway, they delivered this and there's not much move on the European single currency at 106.

EUR/USD

Yesterday, we saw this pullback in the euro against that stronger US dollar as people looked out safe havens in this banking turmoil.

Since then, we have seen that support for Credit Suisse. So a little bit of interest in buying the euro/dollar. But I think really broadly speaking, this is the line to break if we see any more dollar strength, this one over 483 and then there's not much there to support it down to the 200-day moving average down here at 103 and a quarter. So there is potentially more downside to come for the euro against that stronger dollar if we see money going to the dollar as a safe haven.

So the consequences of the European Central Bank raising interest rates as expected. We see the new lower low for the German DAX and not much move for the euro single currency.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market.

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Equities
  • Indices
  • Forex
  • Commodities
website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.

" >


Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.