The euro survived a hawkish Fed pause and now faces an ECB rate decision that should contain a rate hike and a promise for more.  The ECB is expected to raise all three of its key rates by 25bps, which would bring the main refinancing rate to 4.o0%.  The ECB will also update their staff projections, which should show some weakness and potentially signal they are nearing the end of their tightening cycle.

The euro has had a good June and is currently respecting the 50-day Simple Moving Average (SMA).  With an expected improving interest rate differential and optimism that a severe recession won’t be happening, the euro has started to stabilize around the 1.07 region.   A wild card for the euro might be significant easing that comes from the PBOC.  China’s economic recovery post-COVID has struggled and a key trading partner for Europe could post a better second half of the year if the PBOC is aggressive here.

The euro appears to have two big price barriers at the 1.05 and 1.10 levels.  If Wall Street continues to remain optimistic that the Fed will be done after one rate hike and that the global growth outlook won’t face any major shocks, the bullish movement could potentially extend.

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Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

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