ECB reiterates changes made in Strategic Review

The ECB left rates unchanged at 0% and said its PEPP program will continue to be conducted at a significantly higher pace than during the first months of the year, at EU20 billion. However, the ECB changed the wording of their July statement to reflect changes made during the Strategic Review, released earlier in July. As such, the ECB now:

“…expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term. This may also imply a transitory period in which inflation is moderately above target”

Everything you need to know about the ECB

As discussed in our ECB Preview, this statement reiterates the Strategic Review which changed the ECB’s mandate on inflation from “Close to, but below 2%: to a “symmetrical 2%”. They also noted that they forecast inflation to pick up into the end of the year, while moderating to 2% during 2022. Christine Lagarde noted in her press conference that rates will not be raised if inflation is below 2%.

They also stand ready to adjust all instruments if necessary and that the course of monetary policy will depend on the direction of the pandemic and the vaccination progress.

EUR/USD was choppy within 25 pips on either of the pre-statement release near 1.1795 following the release of the statement and during the press conference. On a 240-minute timeframe, EUR/USD has been moving lower in a descending wedge formation and price is nearing the apex. The expectations for a descending wedge will break to the upside and retrace 100% of the wedge. If price closes above 1.1800, it will have broken above the top, descending trendline of the wedge and prove to be a false breakdown below longer-term support. Resistance is at the top of the wedge near 1.1991 and then the confluence of horizontal resistance and a longer-term downward sloping trendline (green) near 1.2050, If price continues to move lower, support for EUR/USD is at the bottom trendline of the wedge near 1.1750, then the lows of March 31^st near 1.1707.

Source: Tradingview, City Index

The results of the ECB meeting were as expected: a reiteration of the Strategic review. Although the governing council forecasts inflation to rise, they expect it to be transitory. Those expecting a more dovish statement may be disappointed. Watch for a possible bounce in EUR/USD if shorts decide to exit their positions.

Learn more about forex trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.