As expected, the ECB held rates unchanged at its February policy meeting. The three headline rates maintained by the European Central Bank were unchanged at their release at 12:45 GMT on Thursday. As this was widely priced in, there was little-to-no market reaction around the time of the release with the only adjustment in the market really being the residual effects of the BoE announcement and expectations surrounding energy price inflation following the publication of UK energy caps.
The statement that accompanied the release was an exhibition in the art of copy and paste with the instruments and language unchanged from the December meeting. The only changes were the most marginal possible with the wording dropping reference to the Bank being willing to change policy in either direction with a long overdue adjustment to the propensity for tighter policy. However, the same cannot be said of the press conference that followed 45 minutes later.
The real key that the market knew to look out for was whether the President would maintain previous language ruling out a change in interest rates before the end of the year. President Lagarde has said this numerous times and despite adhering to the principle of sequencing (dropped at the BoE and Fed), the ECB chief did not rule out 2022 hikes.
Accordingly, several banks are now for the first time calling for rate hikes towards the end of the year. The President did put a lot of importance on the March meeting seeking to kick the can down the road to allow more time to understand the state of the Eurozone economy via data. The ECB was not under pressure to defy market expectations given that there were virtually none. From that perspective, if inflation is not suddenly going to rear its head in the Euro area, the February decision could be read as a mistake. For now, the Euro has been able to break through its 50- and 100-day moving averages against the Dollar and seemingly enter a new range with January’s EURUSD lows marking a near-term price floor.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Rotation out of the US
Humphrey Percy
Mon 14 Apr 2025
Rotation out of the US Quite what that rotation may mean and by how much is exercising the markets and also doubtless the Chair of the Federal Reserve. For the yield on 10 year US Treasury Bonds to move from 3.99% to 4.50% in a week is extraordinary. At the same time, the US Dollar […]
Daily Brief – UK Employment
Humphrey Percy
Wed 16 Apr 2025
UK Employment At 75.1%, employment for people aged 16-64 looks sort of OK depending on what that really means, but it does not alter the fact that there are currently 1.55 million people who are unemployed, or 4.4% of the potential workforce. Another much more significant number, is that there are currently 9.27 million people […]
Daily Brief – China
China FX has found some breathing room against the backdrop of a weaker Dollar. As we know, that weaker Dollar is largely created by two factors. Firstly, the Dollar losing its safe haven status and even attracting a risk premium as investors shield themselves from the uncertainty of President Trump’s tariff game. Secondly, again as […]
