The new President of the European Central Bank – Christine Lagarde – alongside ECB’s Governing Council voted yesterday to keep the main interest rate in the Eurozone unchanged at its previous level of 0.000 per cent.
In doing so, the Council, with its new leader essentially extended its already implemented monetary policy by refraining from making any fundamental changes at the current rate.
In the monetary policy statement, it was further said that:
“At today's meeting, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon”
The market received the decision to extend the duration of the already accommodative monetary policy in conjunction with the admission that it may remain so well into 2020 as a cue for further strengthening of the euro.
Nevertheless, geopolitical developments and external pressures from outside of the Eurozone are also weighing down on the euro at the current moment.
The expectation for the signing of stage one trade deal between the US and China has bolstered the greenback as global trade uncertainties are anticipated to lessen ahead of this year’s festive period.
The EURUSD is currently struggling to breakout above the major resistance level at 1.11700, which was established as the peak of the previous Double Top price formation.
The price of the pair is likely to consolidate between that resistance and the now-support level at 1.10906, which is also the 38.2 per cent Fibonacci retracement.
The forecasts for a likely consolidation are fuelled by the fact that the market remains trading in the previously established range environment, as indicated by the ADX index.
EURUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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