Forecast EURUSD pair based on ECB press release (25-1-2024)


The Impact of Hawkish Speeches in the ECB Press Conference on EURUSD. This presentation explores the influence of ECB speeches on the EURUSD exchange rate and the implications for traders and investors.

Today’s given signal :

Monetary policy meeting of the European Central Bank (ECB)

While markets prepare for an easing cycle in the second half of the year, the ECB will hold back action at its meeting in January. It is expected that the first 25 bps cut will occur in June, although an earlier cut in April is 68% likely. A total of 125 bps or 1.25% of cuts are expected for 2024.

Inflation is declining in the Eurozone, which is useful. The headline price is tantalizingly close to 2%, even after taking out food costs and rebasing energy costs where fuel is becoming less of a drag.

Rate cuts are approaching, but the ECB’s President Christine Lagarde is refusing to admit it. They’ve signalled that hikes have likely ended but argue that a turn in the opposite direction is more distant than the markets are expecting. The euro may slide if the central bank’s defiance appears to be wearing thin as 2024 gets underway.

Are the ECB’s interest rates ready to be cut?

After peaking at 10.6% in November 2022, inflation dropped back to 2.9%. Although temporary fuel subsidies resulting from Russia’s invasion of Ukraine are expected to fade out of the calculation in the months ahead, statistical noise in energy costs may nudge up headline readings.

In December, food prices accounted for nearly a percentage point of the headline reading. To encourage disinflation, the ECB can do relatively little. Food prices are already falling globally. Transmission to overall inflation seems to take about seven months, setting the stage for more cooling ahead.

The leading purchasing managers index (PMI) data published this week indicate that economic activity contracted in January for the seventh straight month. Central banks should be given a reprieve in this situation. How far the ECB is willing to go in easing is the key question now.

Impact on Forex Trading Strategies

Hawkish speeches, which are known for their assertive and aggressive tone, possess a remarkable ability to exert a profound influence on forex traders and their trading strategies. The impact of these speeches is such that they often serve as a catalyst for traders to adapt and modify their approach, as they keenly anticipate potential volatility and discern trends in the EURUSD exchange rate. In such periods, the significance of risk management escalates to the highest degree, as traders strive to safeguard their positions and skillfully navigate through the uncertain market conditions. By meticulously monitoring the rhetoric and actions of hawkish speakers, traders can acquire invaluable insights and make well-informed decisions that ultimately optimize their trading outcomes. Such attention to detail and astute analysis can prove to be the differentiating factor between success and mediocrity in the forex trading realm.

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