ECB Recap: Unchanged, too early to discuss exiting PEPP

The ECB has “kicked the can down the road”


The ECB left rates unchanged at 0%, as expected.  In addition, the central bank said that they would continue to purchase bonds under the Pandemic Emergency Purchase Program at a “significantly higher pace”.  During the press conference that followed, ECB President Christine Lagarde said that the decision to keep that wording was unanimous.  As we discussed in the ECB Preview, the big question heading into the ECB meeting would be whether members would discuss lowering bond purchases back to pre-March levels. Christine Lagarde said that it was “premature” and “too early” for the discussion and it “will come in due time”.  That doesn’t sound like they will be lowering bond purchases any time soon!

Your guide to the ECB!

In addition to the bond buying discussion, the ECB released its quarterly forecasts.  Members revised GDP to 4.6% for 2021 from 4.0% in March and 4.7% in 2022 from 4.1% in March.  In addition, 2021 inflation was revised to 1.9% from 1.5% in March and for 2022, it was revised to 1.5% from 1.2%. They said that although bottlenecks could pose near term headwinds (inflation), the recovery will be buoyed by stronger domestic demand.  Interestingly, they kicked the meeting off by saying that the ECB will be monitoring the exchange rate in their inflation outlook. 

News of more bond buying and “kicking the can down the road” would have one think EUR/USD would head lower.  Combine that with a stronger than expected US CPI, and EUR/USD should be falling through the floor.  However, following the ECB and the CPI, EUR/USD is near unchanged on the day after a 50-pip dip was quickly bought into.  Over the course of the last month, the pair has been confined to roughly a 200-pip range between 1.2050 and 1.2250.  A breakout of either side of the range will determine the next direction for EUR/USD.

Source:  Tradingview, City Index

On a daily timeframe, although EUR/USD has broken underneath the bearish wedge formation, it has been trending sideways in a symmetrical triangle pattern and is nearing the apex.  Expectations are for price to breakout in the same direction as the prior tend, which would be higher.  Resistance is at yesterday’s high and the top downward sloping trendline of the triangle near 1.2218.  Above there, resistance is at the May 26th highs near 1.2267, ahead of horizontal resistance and the bottom upward sloping trendline of the bearish wedge at 1.2350.  Support is at the bottom upward sloping trendline of the triangle near 1.2130, ahead of horizontal support at 1.2104.  Below there, EUR/USD can fall to the 38.2% Fibonacci retracement level from the March 31st lows to the May 26th highs near 1.2048.

Source:  Tradingview, City Index

After high anticipation of possible fireworks from the ECB meeting today, it turned out to be dud. The ECB has “kicked the can down the road”, as it’s premature and too soon to discuss tapering.  The next ECB meeting isn’t until July 22nd.   The question traders should be asking now is the same one we were asking heading into this meeting: “If inflation continues trending higher over the next 6 weeks, will the ECB consider lowering bond purchases back to pre-March levels?” After today’s meeting, Christine Lagarde seems to be hinting that the answer will be “No”.

Learn more about forex trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.