ECB notifies about future plans

Source: Dukascopy Bank SA
On June 9, the European Central Bank published its interest rates and Monetary Policy Statement. In general, as expected, the central bank kept its interest rate's unchanged.

Meanwhile, the central bank revealed that it would hike its interest rates by 0.25% in July. Moreover, the ECB is set to end its Asset Purchase Program on July 1.

However, the monetary policy decision makers have revealed that they not only expect inflation to continue to grow but also downwards revised their Euro Zone GDP forecasts for 2022, 2023 and 2024.

Quoting the statement: "The new staff projections foresee annual inflation at 6.8% in 2022, before it is projected to decline to 3.5% in 2023 and 2.1% in 2024 – higher than in the March projections. This means that headline inflation at the end of the projection horizon is projected to be slightly above the Governing Council's target. Inflation excluding energy and food is projected to average 3.3% in 2022, 2.8% in 2023 and 2.3% in 2024 – also above the March projections.

The Governing Council decided to end net asset purchases under its asset purchase programme (APP) as of 1 July 2022. The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance. "

Released Document

Monetary policy decisions

The EUR/USD reacted to the news with an increase of volatility by fluctuating in a 60 base point range from 1.0750 down to 1.0690.

On a larger scale, the EUR/USD has been trading near 1.0700 since the initial two week recovery that occurred after the rate almost hit the 2017 low level.

Initial Reaction

Larger scale situation

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