The ECB kicks off next week, and anything other than a rate hike would be equivalent to an own goal – sending shockwaves across FX markets.
This alone could provide the Euro a serious boost against its G10 rivals, offering investors a clean setup and big opportunity.
But the real intrigue will be what the ECB signals beyond June…
Meanwhile, EURUSD is stuck within a 100 pips range – waiting for someone to break the deadlock.
Beyond ongoing geopolitical risk, here are some clear macro/technical forces that could move EURUSD:
ECB meeting: Markets widely expect the ECB to hike rates by 25 basis points on Thursday 11th June with any clues on future policy moves adding to the expected volatility. EURUSD is forecast to move 0.6% up or 0.1% down in a 6-hour window after the ECB meeting.
US May CPI report: The Iran conflict has changed the inflation game and May's CPI report is where the scoreline becomes clear. Another hot print may reinforce bets around the Fed hiking rates this year. EURUSD is forecast to move 0.4% up or 0.3% down in a 6-hour window after the US May CPI report.
Technical forces: The EURUSD is on breakout watch with prices trading below the 50, 100 and 200-day SMA. Bloomberg’s FX model points to a 78.5% chance that EURUSD will trade within the 1.1519 – 1.1719 range over the next one-week period.
