The EURUSD is trading at 1.0984 at the start of the press conference:
Prepared remark highlights from ECB Lagarde:
- We will raise rates by 50 basis points at the next meeting and then evaluate the path
- Policy rate decisions will be data dependent
- The asset purchase program will decline by €15 billion per month on average from the beginning of March to the end of June 2023
- We expect growth to stay week
- high inflation , tighter financing conditions are dampening spending and production
- helping is the supply bottlenecks are easing and supply gas is more secure
- subdue global activity in high geopolitical activity continued to act as headwinds to euro area growth
- economy more resilient than expected
- job creation may slow and employment could rise
- important to start rolling back fiscal support
- fiscal measures could exasperate inflationary pressures and necessitate a stronger ECB response
- energy prices lower-than-expected in December
- pricing pressures are strong
8:57 AM ET :The EURUSD is trading down to 1.0953 and approaches the support swing area between 1.0928 and 1.0943. Meanwhile US preliminary stocks are moving higher with the doubt now in positive territory by 46 points. The NASDAQ futures are employing a another big rise of about 250 points and the S&P index is trading 39.5 points
German 10 year yields are down 15.5 basis points. French 10 year yields are down -18.7 basis points. Italian 10 year yields are down 30 basis points at 3.99%. German to yield is down 16.5 basis points to 2.5%
In European equity markets,
- German DAX is up 1.8%.
- France's CAC is up 1.1%.
- UK's FTSE 100 is up 0.93% after they raised by 50 basis points as well.
9:00 AM ET
- Risks to growth more balance
- risk to inflation outlook more balanced
- most inflation expectations around 2%
- while weakening pent-up demand still driving up prices
- we expect to raise rates further by another 50 basis points at the next policy meeting, and then will evaluate the subsequent path of our monetary policy
- keeping interest rates at restricted levels will reduce inflation and reduce upward inflation expectations
The EURUSD has now moved to a new low of 1.0929. The high price in January reached 1.09288. They move below that level would have traders looking toward the 1.0900 level followed by the 100 and 200 are moving averages near 1.0892
Question & answer comments:
- Our decision today is not the March decision
- Discussion was marked by continuity and consistency
- There was a very large consensus today
- We have not reached the peak in rates and we do have ground to cover
- We will need to assess the pace and level
- General agreement for 50 basis points in February and 50 basis points in March
- There was discussion and not full agreement on communication
- I cannot think of the scenarios where 50 basis point hike would not happen unless they are quite extreme
- Underlying inflation pressures, fiscal measures, wages all warrant 50 basis point hike in March
- Our objective is to drive inflation down to 2% in the medium-term
- With regard to inflation, we are particularly focused on energy costs, and wages. Wages will be a significant component of inflation in the months can come. We are looking at fiscal measures.
- Would not say that disinflationary processes already at play
- there is no symmetry of risk
- there was consensus on "more balanced" risk
9:35 AM ET
US stocks open higher led by the NASDAQ index which is up over 2%.
The EURUSD is back down retesting the lows for the day and the highs from January at 1.09288. The current price trades at 1.0934.
The GBPUSD is trading below its 100 hour moving average 1.23508, and support from the January 24 low at 1.2262. The current price is trading at 1.2308.
More from the Lagarde presser:
- To get inflation back to target, we will use interest rate hikes
- We won't be at peak level in March
- There will be mostly likely ground to cover
- Not suggesting steady pace on ongoing basis. It might be 50, 25 basis points or whatever rates are needed
Despite the efforts to sound more hawkish, the EURUSD continues its move to the downside and has broken back below the 1.09288 level. The next key target comes in at 1.0892 which is near the 100 and 200 hour moving averages.
The press conference ended with the EURUSD near the low for the day at 1.0910. The EURUSD was at 1.0984 at the start of the press conference. The market did not buy the hawkishness from the ECB governor.
- German 10 year yield is at 2.099%, down -19.3 bps
- France 10 year 2.542%, -20.5 basis points
- Italy 10 year 3.952% -31.7 basis points
- Spain 10 year 3.082%, -25.2 basis points
- UK 10 year 3.095% -20 basis points