ECB Hikes By .5%

Despite mixed expectations ahead of the meeting, the ECB pressed on with its latest intended .5% rate hike yesterday. The bank had signalled last time around, and plenty of times since, its intention to lift by a further half-point. However, amidst the recent banking sector-fuelled market volatility, many had scaled back their forecasts, expecting a smaller hike from the bank.

Inflation Remains Key 

Ultimately, the bank was seen citing the need to keep fighting inflation which remains at elevated levels. Indeed, there is an argument for saying that the bank sticking to a larger hike is a vote of confidence in the health of the eurozone banking sector with a smaller hike likely to have been interpreted as a sign of fear from the bank.

Tools To Act If Needed

Commenting on the current issues, ECB head Lagarde was keen to stress that the current market conditions are not the same as they were in 2008 and sought to reassure markets that the ECB has the tools and the willingness to act as needed.

ECB Monitoring Situation 

Looking ahead, Lagarde noted that the bank will be monitoring conditions in the banking sector and added that its aim of achieving price stability would be handled separately from delivering financial stability. No specific mention of further hiking plans was made at the meeting, however, suggesting  that the key now will be how the current situation develops in coming months.

Technical Views

EURUSD

EUR has been a little firmer on the back of the meeting with EURUSD moving higher off the 1.0515 support level. While still within the bull channel, the focus is on a break of the 1.0785 level and a continuation higher in line with bullish momentum studies readings.