BOE & ECB On Deck Today

Following on from the Fed yesterday, the BOE and ECB December meetings will take centre stage today. Both central banks are expected to hike by a further .5% while signalling the need for continued hikes into next year. However, if we’re looking at where the risks lie in terms of opportunities, the ECB looks to have more hawkish risks going into today’s meeting.

Hawkish Risks Seen More for ECB Than BOE

 With the BOE having stridently pushed back against the idea of further aggressive tightening on the back of the last .75% hike, and with inflation having cooled last month, a smaller .5% hike looks fairly certain. However, the ECB being much earlier on in its tightening journey and with Lagarde and co sounding more concerned about inflation, there are outside risks of a surprise today which could see the bank hiking by a larger .75%. While this would no doubt drive EURGBP higher, short term at least, the greater impact is likely to be seen in EURUSD with the further eroding of monetary policy divergence between the Fed and the ECB set to favour EUR near-term.

Technical Views

EURUSD

The rally off the YTD lows has seen the market continuing to break higher recently. The last notable technical breakthrough was the move through the 1.0364 level. Momentum studies have waned a bit recently, suggesting room for a correction. However, while price stays above the 1.0364 level the focus remains on a continued push higher and an eventual break of the 1.0785 level towards the 1.1126 level above.