EUR/USD Pushes Higher on ECB Rate Hike Commentary

EUR/USD price chart and analysis

• ECB hawks are in force after yesterday’s rate hike
• Eurozone inflation remains high and stubborn.

Most read: ECB delivers 50bp hike despite banking sector woes, EURUSD undecided

The European Central Bank (ECB) hiked interest rates by 50 basis points yesterday and further rate hikes can be expected according to policymakers’ commentary released today.

ECB Villeroy de Galhau – We decided to do what we said we would do awards. (Our) priority is to fight inflation.

ECB Casimir – Need to proceed with rate hikes but no need to speculate on May decision. Core inflation is stubborn and upside risks to inflation dominate. ECB not on target.

ECB Simkus – February core inflation dynamics are worrying. I still believe this wasn’t the last rate hike. The final rate was not reached. Wage pressure is increasing on core prices.

Yesterday’s 50 basis point rate hike by the ECB, while expected, was only agreed by policymakers after the Swiss National Bank (SNB) announced it would open a CHF 50 billion credit facility for Credit Suisse, such a ECB sources Report. The ECB also feared that if it didn’t implement a half-point hike, investors might take its inaction as a cause for concern. President Lagarde specifically said at the February meeting that the central bank would raise interest rates by 50 basis points.

The latest euro-zone inflation data shows why the ECB has become increasingly adamant that further rate hikes are needed. The final figures for February show annual headline inflation at 8.5%, down a tenth of a percentage point from the previous month, while core inflation rose to 5.6% from 5.3% in January.

According to data compiler Eurostat, “The lowest annual rates were registered in Luxembourg (4.8%), Belgium (5.4%) and Spain (6.0%). The highest annual rates were recorded in Hungary (25.8%), Latvia (20.1%) and the Czech Republic (18.4%). Compared to January, annual inflation has fallen in fifteen Member States, remained stable in two and risen in ten.”

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EUR/USD is moving higher today, buoyed by rate hike talks, seeing a build up of recent highs and the 50-day moving average around 1.0690-1.0760. A confirmed break up here opens the way to 1.0791, followed quickly by 1.0800.

EUR/USD daily chart – March 17, 2023

Chart via TradingView

Retail positioning is mixed

Data from retail traders shows that 53.61% of traders are net long, with the ratio of traders long to short being 1.16 to 1. Traders’ net short position is 21.63% higher than yesterday and down 7.03% from last week.

We usually view crowd sentiment as contrarian and the fact that traders are net long suggests that EUR/USD could fall further. Still, traders are less net long than yesterday and compared to last week. Recent mood changes warn that the current The EUR/USD price trend could soon reverse to the upside, although traders remain net-long.

What is your opinion on this EURO – bullish or bearish?? You can let us know using the form at the bottom of this article or contact the author via Twitter @nickcawley1.