ECB discount is a done deal – OCBC

The ECB’s policy decision is due today (22:15 SG), followed by Lagarde’s press conference (22:00 SGT). Weaker CPI prints from the eurozone, Germany and Spain and weaker manufacturing PMI readings added to expectations that the ECB should be on track to cut interest rates again, note OCBC FX analysts Frances Cheung and Christopher Wong .

The rate cut decision is more or less a done deal

“Markets have priced in 25bp at this meeting and around 38bp for the rest of the year (another 1.5bp cut). While a rate cut decision is more or less a done deal, the focus is on Lagarde’s press conference and the staff’s macroeconomic projection. So far, ECB officials have not been exactly accommodative, and officials appeared to be preparing for a more gradual pace when it comes to policy easing.”

“Potentially, the ECB may even turn out to be a non-event if officials reiterate that policy is not on a set cycle and policymaking remains data-driven. EUR was last seen at 1.1010 levels. Bearish momentum on the daily chart is intact, while the RSI has declined. The risks are tilted to the downside for now.”

“Support at 1.0970 (50 DMA, 38.2% fibo retracement from 2024 low to high), 1.09 (50% fibo). Resistance at 1.1060 (23.6% fibo), 1.1080 (21 DMA).”