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 at 12:45 GMT, which will be followed by the post-meeting press conference at 13:30 GMT. The ECB remains one of the more dovish major central banks and maintained its patient approach despite rising inflationary pressures. In fact, policymakers have made every effort to push back on market bets for tighter policy and talked down the need for any action to counter inflation.

Moreover, worries about a significant slowdown in the Eurozone economic activity – amid the rapid spread of the Omicron variant – could further allow the ECB to maintain its dovish stance. Hence, the focus will be on the ECB's plan to end the Pandemic Emergency Purchase Program (PEPP) in March 2022. Apart from this, investors will take cues from the updated economic projections and ECB President Christine Lagarde's remarks at the post-meeting press conference.

According to Valeria Bednarik, Chief Analyst at FXStreet: “market participants are expecting an upward revision to inflation projections, for this year and the next ones. Growth, on the other hand, can suffer a downward revision as the region is currently struggling with restrictions due to the rapid spread of Omicron.”

How could it affect EUR/USD?

Heading into the key central bank, the EUR/USD pair inched back closer to weekly swing high, albeit struggled to capitalize on the move amid the emergence of some US dollar buying. A more dovish ECB outlook would be bearish for the shared currency and turn the pair vulnerable to resume its downtrend witnessed since late October. Conversely, a hawkish stance – though seems unlikely – should prompt aggressive short-covering move around the pair and pave the way for some meaningful recovery from the YTD low touched in November.

Meanwhile, Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the EUR/USD pair: “The technical outlook seems to have turned bullish with the Relative Strength Index (RSI) indicator on the four-hour chart climbing to 60. Additionally, EUR/USD is holding above the 20-period, 50-period and 100-period SMAs on the same chart.”

Eren also outlined important technical levels to trade the major: “On the upside, 1.1350 (static level) aligns as first resistance before 1.1370 (200-period SMA) and 1.1380/1.1400 (static level, psychological level) area. Supports are located at 1.1300 (psychological level), 1.1280 (50-period SMA, 100-period SMA) and 1.1240 (static level).”

Key Notes

  •  European Central Bank Preview: More recalibration or actual tightening?

  •  ECB December Preview: How will ECB replace PEPP?

  •  EUR/USD Forecast: Euro bulls could step aside on dovish ECB

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.