Market Recap: ECB Monetary Policy Decision And US Inflation – Key Data To Watch Today

The ECB rate decision and US inflation are due today, and we will soon find out the impact on the euro and the US dollar pairs. 

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Today is the most important trading day of the week. Traders and investors alike have watched financial markets moving in tight ranges, waiting for the European Central Bank (ECB) to deliver its monetary policy and for US inflation data.

The ECB’s decision and the US inflation data are issued within a time span of about forty-five minutes, so rising volatility is a given.

The euro has traded with a bid tone since the start of April, led by the EUR/USD exchange rate. But it is unclear if the bid tone behind the euro is due to the ECB’s relative hawkishness or the US dollar’s ongoing weakness. Today’s price action should solve the mystery.

Equities remain close to their highs, and the focus on main stock market indices is to see their reaction to possible tapering talks/warnings from central bankers. The taper tantrum seen in the aftermath of the 2008-2009 Great Financial Crisis is vividly remembered by market participants and policymakers alike, thus something to avoid, if possible.

The crude oil price is the star of the week so far. Yesterday, it traded above $70, fueling inflation fears and reflecting the ongoing global economic recovery.

Daily Analysis

Expect ranges and the slow price action to dominate until the ECB delivers its decision. The focus is on how it balances the asset purchases between the APP and PEPP programs. Also, forty-five minutes later, the ECB staff projections on inflation and economic growth are destined to move the euro markets.

At the same time, the US inflation data is expected to increase on a monthly basis by 0.4% on the headline release and by 0.5% on the core data. Any deviation from the forecast will move the dollar, as the market participants became extremely sensitive to inflation data during the last months.

Markets to Watch

Dax index, EUR/USD, EUR/JPY– markets in focus today.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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