EUR/USD Forecast: ECB Expected to Deliver a 50bps Rate Hike

  • The Fed declared it had reached a turning point in its battle against inflation.
  • The European Central Bank is anticipated to hike interest rates.
  • Inflation in the 20 euro-using nations decreased to 8.5% in January.

Today’s EUR/USD forecast is bullish. The dollar fell on Thursday as the US Federal Reserve declared it had reached a turning point in its battle against inflation, giving investors hope that its rate-hike campaign would end.

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Fed Chair Jerome Powell’s Wednesday comments that “the disinflationary process has started” in the biggest economy in the world served as a dovish message for investors.

On Thursday, the European Central Bank will likely increase interest rates, with more increases anticipated in the coming months. 

The ECB has been hiking interest rates at a record rate to combat an unexpected spike in inflation in the eurozone, which was caused by several factors, including the COVID-19 pandemic and an oil crisis that came after Russia invaded Ukraine.

According to forecasts made in December, the central bank of the 20 nations that use the euro is expected to hike its deposit rate by another fifty basis points, to 2.5%, on Thursday.

However, after the US Federal Reserve reduced the pace of its hikes on Wednesday, ECB President Christine Lagarde will undoubtedly be questioned about smaller increases starting next month.

The euro zone’s inflation declined in January for the third consecutive month. Still, the European Central Bank may not feel much relief because underlying price increases remained stable, and questions have already been raised about the accuracy of the data.

Inflation in the 20 euro-using nations decreased to 8.5% in January from 9.2% in December.

EUR/USD key events today

Investors will pay attention to the European Central Bank meeting. They expect the bank to raise rates by 50bps after the meeting.

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EUR/USD technical forecast: Bulls are leaping over resistance levels.

EUR/USD technical forecast

The 4-hour chart shows EUR/USD in a strong bullish move, trading far above the 30-SMA. The RSI also shows how strong bulls are as it trades in the overbought region. However, as this is extreme for the RSI, it has allowed the return of bears for a retracement.

The price is currently retesting the 1.1000 key level and could push lower before the bullish move continues.

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