Confusing ECB Message Ahead of the FOMC Statement Next Wednesday


It seems like the financial world lives from one event to another, and the market barely reacts in between. Let us not forget that this is a U.S. election year, and most traders and investors are cautious ahead of the event.

For this reason, financial markets, and especially the currency market, consolidate more than usual. For instance, a quick look at the EURUSD, and one can see consolidation around the 1.20 area. More precisely, while rejected at the first 1.20 attempt, the EURUSD still keeps an eye on the level as buyers resurface at each and every market dip.

Confusing ECB Message Ahead of the FOMC Statement Next Wednesday

ECB Sent the Wrong Message

Last Thursday, the ECB meeting was supposed to highlight record-low inflation in the Euro area and the willingness to do more in terms of monetary policy easing. At least, this was the consensus ahead of the ECB press conference.

However, the reality stunned Euro traders. The ECB sent a hawkish message, despite the fact that inflation may fall even further. The central bank said that inflation is in line with the staff projections, and it even raised the projections for the years ahead.

This comes in sharp contrast with the Federal Reserve of the United States. In a historic decision, the Fed shifted its mandate to average inflation targeting (AIT) from a dual mandate that dealt with both inflation and job creation.

Towards the end of the last week, the ECB seemed to have acknowledged that the markets misunderstood its message. Phillip Lane, an executive board member at the ECB, posted a blog on the ECB’s website one day after the ECB’s decision, mostly saying what the markets wanted to hear a day earlier. It is not clear at this time if it was a communication error from the ECB on Thursday, corrected by Lane’s blog post on Friday.

What it is sure is that the Fed on Wednesday will offer more clues about its new AIT framework. More specifically, investors will want to know more details about the period that the Fed considers for averaging the inflation (i.e., how many months/years in the past are considered in the averaging methodology).

But even with the Fed’s message this Wednesday, the market’s volatility is likely to remain subdued. The U.S. elections are just around the corner, and that is the main focus of the investment community.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Weekly Market Wrap With Gary Thomson: CAC 40, AUD, OIL, AMAZON The US Continues to Trump the Euro Economy on Key Metrics, But What Is Next? Is the UK really in a recession? Perhaps 2024 data will be different Weekly Market Wrap With Gary Thomson: US INFLATION, GBP/USD, GOLD, BITCOIN EURGBP continues to be suppressed during February. Will it rise again?

Latest articles


NASDAQ Rally Shows Tech Stocks Are Back in Focus - But for How Long?

The NASDAQ index, well known as a premier listing venue for North American technology companies across the entire spectrum from the Silicon Valley giants to recently listed newcomers, has been going from strength to strength during the beginning part of

Forex Analysis

The Market Focusing on Speech of Federal Reserve Head

Despite the abundance of fundamental data of the past trading week, the main currency pairs continue to trade in rather narrow flat corridors. Thus, the US dollar/yen currency pair is trading above 150.00, from time to time testing

Forex Analysis

Swiss Franc Weakens after Inflation News

Inflation in the country fell in February to its lowest level in nearly two-and-a-half years, data from Switzerland's Federal Statistical Office showed on Monday. Although consumer prices rose 1.2% compared to a year earlier, there is reason to believe

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65.68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.