EURUSD: Euro Edges Higher As ECB Members Confirm March Rate Hike

The EURUSD currency pair was trading sideways for most of today despite the European Commission upgrading their growth forecast for the region to 0.9%. Investors remained risk averse, which kept riskier assets such as the euro on the back foot. 

The euro was also not affected by the Commission downgrading its inflation outlook for the region to 5.6%, citing lower gas prices and a strong labour market as key reasons behind the downgrade. The eurozone could avoid a technical recession if the situation keeps improving.

Still, the lack of significant releases from the European docket also hurt the single currency, which needed more impetus to rally higher during most of the European session. However, the EURUSD pair started moving during the American session. 

Most analysts, investors and currency traders are waiting for tomorrow when the Eurozone GDP data will be released. Many are hoping that the GDP print will be positive, reinforcing expectations that the region can avoid a recession this year. 

Policymakers from the European Central Bank (ECB) were optimistic in comments made earlier today about inflation in the eurozone. Mario Centeno, an ECB policymaker and Governor of the Bank of Portugal, said that the ECB remained open to changing its rate hike outlook as the data changes. 

However, Centeno confirmed that the ECB was still keen on hiking rates by 50 basis points at its March meeting, after which it will look at the data to see if further rate hikes are warranted. ECB Vice-President Luis de Guindos Echoed Centeno’s sentiments saying that “rate increases beyond March will depend on data.”

Many are speculating as to when the ECB will top hiking rates. Still, the central bank is leaving the door for future rate hikes wide open, just like their counterparts at the Fed, as they try to avoid speculative buying in the markets as investors anticipate a return to easy money policies. 

All leading central banks are expressing caution regarding reversing course and adopting less stringent monetary policies since they fear the rampant speculation and asset bubbles that can be created in an easy money environment. 

*This is not investment advice. 

The EURUSD currency pair was trading up 30.4 (0.28%) at writing as the euro rose against the US dollar.