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

Economic calendar: NASDAQ 100 May Keep Falling, High Volatility in Oil Markets, Potential Appreciation of the US Dollar Financial Markets Waking Up after a Turbulent Week: Important News Economic Calendar: RBA, BOJ, BOE, and Fed Meetings Economic Calendar: A Torrent of UK and Chinese Releases, US Inflation and Inventories, and ECB Meeting Economic Calendar: US PMI Data, Stock Market Decline, and Oil Surge

Latest articles

Forex Analysis

Market Analysis: US Federal Reserve Contemplates Future Interest Rate Hikes Amid Economic Resilience

In an intriguing turn of events, the US Federal Reserve has hinted at the possibility of yet another interest rate hike in the near future, keeping financial markets on their toes. During its September 2023 meeting, the Federal Reserve chose

Forex Analysis

USD/JPY Analysis: For the First Time This Year, the Rate Exceeds 149 Yen Per Dollar

The reason for the stable trend, as we have repeatedly pointed out, is the difference in the monetary policy of the USA and Japan. Inflation in Japan has been above 2% for more than a year, and the media are


Market Analysis: Rising Bond Yields Are Driving Down Price of Gold

The yield on 10-year bonds exceeded 4.5% per annum – a 16-year high. The demand for them was promoted by: → tough statements from the Fed last week that the high base interest rate will remain as long as necessary. Moreover,

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. 60% 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.