The EURUSD currency pair was trading down over 60 pips after the European Central Bank hiked interest rates by 25 basis points from 3.50% to 3.75%, as expected. The euro pulled back from the resistance zone it has been trading against since mid-April.
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The same scenario happened yesterday after the Federal Reserve’s Open Market Committee (FOMC) hiked interest rates by 25 basis points. Investors are keen on selling currencies after interest rate decisions, as was the case with the US dollar yesterday after the FOMC decision.
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The euro’s performance in the afternoon was primarily driven by investor expectations and the ECB rate decision, even as the central bank left the door open for further rate hikes saying that it cannot rule out another rate hike given that recent inflation data shows that inflation remains at levels that were much higher than what the ECB expects.
The euro ignored the multiple PMI reports released earlier today that were primarily mixed, with the Eurozone final services PMI released by IHS Markit missing expectations and services PMIs from France and Spain.
The single currency also initially benefitted from the positive German trade balance data released earlier today, which showed that Europe’s largest economy had a trade surplus of €16.7 billion, beating analysts' expectations set at €16.1 billion.
The positive changes in Spain’s unemployment rate also positively impacted the EURUSD, which edged higher earlier today due to the mostly positive data out of the euro area. Spain lowered its unemployment rate by 73,9000 individuals, marking a significant win for the country.
The release of weak US goods and services trade balance data shortly after the ECB decision also positively impacted the currency pair, which pared back some of its losses. The higher-than-expected US initial jobless claims data had a minimal impact on the currency pair.
The EURUSD currency pair was headed much lower at the time of writing as investor sentiment towards the single currency soured further. The euro’s weakness was still linked to the ECB rate decision despite the US dollar being the stronger currency.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair was trading down 31.1 pips (0.28%) at writing after the ECB rate hike.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.