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- European Central Bank (ECB) to Keep Rates on Hold, Preserve EUR 60B QE Program.
- Will ECB President Mario Draghi Continues Speak Out Against a ‘Taper Tantrum?’
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Trading the News: European Central Bank (ECB) Interest Rate Decision
The fresh batch of rhetoric coming out of the European Central Bank (ECB) may boost the appeal of the single-currency and spur a further advance in EUR/USD should the Governing Council adopt an improved outlook for the monetary union.
What’s Expected:
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Why Is This Event Important:Data prints highlighting a stronger recovery in Europe may encourage the ECB to strike a more upbeat tone this time around, but the threat for a ‘taper tantrum’ in the euro-area may push Mr. Draghi to cast a dovish outlook for monetary policy as the central bank head pledges to carry out the easing cycle until at least September 2016.
Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
| Core Consumer Price Index (YoY) (MAY A) | 0.7% | 0.9% |
| M3 Money Supply (YoY) (APR) | 4.9% | 5.3% |
| Gross Domestic Product (YoY) (1Q A) | 1.0% | 1.0% |
Faster price growth paired with the pickup in lending for small and medium-sized enterprises (SME) may prompt the Governing Council to soften its dovish tone, and the ECB hawks may look to halt the easing cycle ahead of schedule as the positive developments highlight an improved outlook for growth and inflation.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
| Purchasing Manager Index- Composite (MAY P) | 53.9 | 53.4 |
| Trade Balance s.a. (MAR) | 21.9B | 19.7B |
| Retail Sales (MoM) (MAR) | -0.7% | -0.8% |
Nevertheless, the ECB may retain a cautious outlook for the region amid waning demand from home and abroad, and President Draghi may largely preserve his pledge to fully implement the quantitative easing (QE) program in an effort to encourage a stronger recovery.
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How To Trade This Event Risk(Video)
Bullish EUR Trade: ECB Softens Dovish Tone & Adopts Improved Outlook
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Need green, five-minute candle following the policy announcement to consider a long EUR/USD trade.
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If market reaction favors a bullish Euro trade, buy EUR/USD with two separate position.
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Set stop at the near-by swing low/reasonable distance from cost; need at least 1:1 risk-to-reward.
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Move stop to entry on remaining position once initial target is met, set reasonable limit.
Bearish EUR Trade: ECB Sticks to Easing Cycle & Talks Down ‘Taper Tantrum’