As ECB gears up for its seventh consecutive interest rate hike in a row today, market participants are divided on the size of the increase. While the majority expect a 25bps hike, which would bring the main refinancing rate to 3.75% and the deposit rate to 3.25%, a 50bps move cannot be totally ruled out.
The size of the hike carries significant implications for the market. A 50bps increase would suggest that the tightening cycle could extend beyond June, even if it slows down then. However, a 25bps hike would create more ambiguity for July meeting. Ultimately, the path forward will still heavily depend on the next round of economic projections, only available at June meeting.
Suggested readings on ECB:
- ECB Set to Raise Rates, But By How Much?
- How Will ECB Meeting Affect EUR?
- ECB Preview: The Art of Compromise
EUR/CHF’s recovery from 0.9774 has been underwhelming, stalling at 0.9878 before reversing course. It seems that price actions from 0.9995 are forming a triangle consolidation pattern. While a break below 0.9774 cannot be ruled out, any downside should be limited. Conversely, breaking 0.9878 resistance would indicate that the rise from 0.9704 is set to resume through 0.9995. Let’s see how it plays out.
