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 11:45 GMT. The ECB adjusted the inflation target to a symmetric 2% at the conclusion of the strategy review earlier this month. Moreover, ECB President Christine Lagarde hinted at a change to the central bank's guidance last week, making this week's meeting very important. While the ECB is widely expected to keep its monetary policy settings unchanged, the market focus will be on any significant changes in the forward guidance.

As analysts at Deutsche Bank explain: “We expect some changes to forward guidance and communications around the new average inflation targeting unveiled earlier this month. So an interesting first event in a brave new world/same old world (delete according to your view) for the ECB after their review.”

How could it affect EUR/USD?

Given the disagreement among members over the monetary policy outlook and the pandemic-related risk, market participants expect a dovish tilt in the statement. This should be enough to prompt some fresh selling around the shared currency and force the EUR/USD pair to prolong its recent downward trajectory witnessed over the past two months or so.

Meanwhile, Yohay Elam, FXStreet's own analyst, offered a brief technical outlook for the EUR/USD pair: “Euro/dollar has been setting lower lows and lower highs – a downtrend. It is still suffering from downside momentum on the four-hour chart and trades below the 50, 100 and 200 Simple Moving Averages. Moreover, the Relative Strength Index (RSI) is balanced, maintaining a significant distance from oversold conditions. Overall, there is room for falls.”

Yohay further outlined important technical levels: “Some support awaits at 1.1770, last week's low, followed by the fresh three-month trough of 1.1750. Further down, 1.1717 and 1.17 await EUR/USD. Some resistance is at the daily high of 1.18, followed by 1.1820, 1.1850 and 1.1880 – all capped recovery attempts in recent days.”

Key Notes

  •  ECB Preview: Three reasons why Lagarde could hit the euro when it is down

  •  ECB Preview: Forecasts from 12 major banks, dovish tone amid Delta force

  •  EUR/USD Forecast: Will Lagarde trigger next leg lower? Where things stand ahead of the 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.