When is the European Central Bank (ECB) rate decision and how could it affect EUR/USD?

ECB monetary policy decision – Overview

The European Central Bank (ECB) is scheduled to announce its monetary policy decision this Thursday, December 15, at 13:15 GMT, which will be followed by the post-meeting press conference at 13:45 GMT. Against the backdrop of the recent hawkish commentary by several ECB officials, the markets have been pricing in additional jumbo rate hikes in the coming months. That said, easing of inflationary pressures in the Eurozone might have forced investors to scale back expectations for a more aggressive policy tightening by the ECB. Hence, investors will scrutinize the accompanying monetary policy statement and ECB President Christine Lagarde's comments for fresh cues about future rate hikes.

Analysts at Danske Bank offer a brief preview of the event and write: “Another 50 bps rate hike has been well telegraphed and fully priced by markets. We expect the ECB to continue to sound very hawkish and signal that further rate hikes are coming, in particular giving guidance for another 50 bps hike in March. We expect Lagarde to give a strong reminder to markets to tighten financial conditions. On balance, a firm hawkish message from the ECB should contribute to a stronger EUR upon announcement.”

How could it affect EUR/USD?

According to Valeria Bednarik, Chief Analyst at FXStreet: “the market’s reaction to the ECB monetary policy decision will mostly depend on the wording of the statement and whatever President Christine Lagarde says in the press conference.”

Given that a 50 bps rate hike is already priced in, the markets are unlikely to react to the expected move. That said, a hawkish ECB commentary should be enough to provide a strong boost to the shared currency and allow the EUR/USD pair to build on the post-FOMC momentum beyond the 1.1000 psychological mark. Nevertheless, the announcement should infuse some volatility and allow traders to grab some meaningful opportunities.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook and writes: “EUR/USD has pierced through the ascending channel coming from early January after having stayed below it earlier in the week. Moreover, the Relative Strength Index (RSI) indicator on the four-hour chart stays above 70, confirming the pair's overbought conditions.”

Eren also outlined important technical levels to trade the EUR/USD pair: “On the downside, 1.0980 (former resistance, upper limit of the ascending channel) aligns as initial support ahead of 1.0940 (mid-point of the ascending channel) and 1.0920 (former resistance, static level).”

“In case the pair extends its rally on a hawkish ECB message, 1.1030 (static level) aligns as interim resistance before 1.1100 (psychological level, static level) and 1.1140 (static level),” Eren adds further.

Key Notes

   •  European Central Bank Preview: Lagarde needs to repeat her hawkish message

   •  EUR/USD Forecast: Investors could ignore overbought conditions on a hawkish ECB

   •  ECB Preview: Forecasts from 14 major banks, another 50 bps hike

About the ECB interest rate decision

ECB Interest Rate Decision is announced by the European Central Bank. Usually, if the ECB is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the EUR. Likewise, if the ECB has a dovish view on the European economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.