The EUR/USD pair is in the spotlight ahead of the latest US retail sales data and the interest rate decision by the European Central Bank (ECB). It is trading at 1.0882, which is slightly above the lowest level this month.
ECB decision and US retail sales
The EUR/USD is bouncing back as investors position themselves for the upcoming interest rate decision by the European Central Bank.
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The decision comes at an important time for the global economy. Most central banks have started getting more aggressive in a bid to fight inflation. For example, the Reserve Bank of New Zealand (RBNZ) decided to deliver its highest rate increase in 22 years on Wednesday.
On the same day, the Bank of Canada also decided to hike interest rates by 0.50%. It also signaled that it will start a gradual phase of quantitative tightening (QT) in a bid to fight inflation. The Federal Reserve has already started hiking interest rates and it has hinted that it will also start tightening its balance sheet.
Therefore, the EUR/USD pair will react to the statement by the ECB. Analysts expect that the bank will leave its interest rate unchanged where it has been for years. They also expect that the ECB will continue with its gradual pace of ending its net asset purchases. Analysts at Danske Bank now expect that the ECB will hike interest rates in its September meeting. In a note, analysts at UOB said:
“But we are still not expecting any changes in key interest rates for now. Rather, any policy tightening by the ECB this year, will solely be in terms of ending its QE programs.”
The EUR/USD pair will also react mildly to the latest US retail sales data. Analysts expect the numbers to reveal that sales held steady in March even as inflation surged.
EUR/USD forecast
The daily chart shows that the EUR/USD pair has been in a strong bearish trend for months. Despite the small pullback, the pair remains below the 25-day and 50-day moving averages while the MACD has moved below the neutral level. Therefore, there is a likelihood that the pair will have a bearish breakout after the ECB decision on Thursday.
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Source: https://invezz.com/news/2022/04/13/eur-usd-forecast-ahead-of-the-ecb-interest-rate-decision/