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, March 16, at 13:15 GMT, which will be followed by the post-meeting press conference at 13:45 GMT. Investors had begun to doubt if the ECB will stick to its commitment and deliver another big rate hike following last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank. That said, reports on Wednesday indicated that ECB policymakers are still leaning towards a jumbo 50 bps lift-off. This, along with a positive development surrounding the Credit Suisse saga, supports prospects for an aggressive hike due to high inflation. Apart from this, investors will scrutinize the accompanying monetary policy statement and ECB President Christine Lagarde's comments for fresh cues about the future rate-hike path.

According to Matías Salord, News Reporter at FXStreet: “The ongoing turmoil in the banking system has become a factor of uncertainty. One more. Its impact is not yet defined. Contagion fears appear partially contained at times, but it could all change in the near future. The ECB has to decide on Thursday what to do with the mentioned context. The damage so far from the SVB drama is unknown. Such circumstances look unlikely to change the course of the 50 bps rate hike expected.”

How could it affect EUR/USD?

Heading into the key central bank event risk, the EUR/USD pair trades with a positive bias above the 1.0600 mark amid easing fears of a full-blown banking crisis in Europe and a modest US Dollar weakness. A hawkish 50 bps rate hike, though theoretically should be positive for the shared currency, might raise contagion fears and fuel speculations for much stronger or earlier ECB rate cuts, which, in turn, should attract fresh sellers around the major.

Furthermore, a 25 bps lift-off, with no forward guidance or a shift to smaller hikes going forward, should be enough to weigh heavily on the Euro. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside. Hence, any positive market reaction is more likely to get sold into and runs the risk of fizzling out rather quickly.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important technical levels to trade the major and writes: “EUR/USD was last seen trading in 1.0620/30 area, where the 50-period and the 10-period Simple Moving Averages (SMA) align. In case the pair stabilizes above that region, it could face interim resistance at 1.0660 (static level) before targeting 1.0690/1.0700 area (200-period SMA, psychological level, static level).”

“On the downside, first support is located at 1.0600 (psychological level, static level) ahead of 1.0530 (static level= and 1.0500 (psychological level),” Eren adds further.

Key Notes

   •  ECB Preview: Banking jitters give arguments for doves

   •  ECB Preview: Set for 50 bps rate hike, Lagarde holds the key

   •  EUR/USD Forecast: Euro could extend rebound if ECB downplays market jitters

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.