• Home
  • Partners
  • Help and support
  • English
Pepperstone logo
Pepperstone logo
  • Ways to trade
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Active trader program
    • Refer a friend
    • Trading hours
    • 24-hour trading
    • Maintenance
    • Risk management
  • Markets
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Indices

      Enjoy 24-hour pricing on the UK100, US30 and more

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Shares
    • ETFs
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
  • Trading platforms
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader4
    • CopyTrading
    • cTrader
    • Trading tools
  • Market analysis
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

  • About us
    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Active trader program
    • Refer a friend
    • Trading hours
    • 24-hour trading
    • Maintenance
    • Risk management
    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Indices

      Enjoy 24-hour pricing on the UK100, US30 and more

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Shares
    • ETFs
    • Currency indices
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader4
    • CopyTrading
    • cTrader
    • Trading tools
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
EUR

ECB Meeting Preview - Will the hawks' squawks finally be heard?

Luke Suddards
Luke Suddards
Research Strategist
Sep 8, 2021
Share
It's all about PEPP this week as the ECB delivers their decision tomorrow. Let's take a look below at what you need to know.

Heading into this ECB meeting, traders are trying to figure out if last week’s punchy inflation number (3% vs 2.7% YoY) is enough to finally galvanize the ECB into slowing down its pace of asset purchases via PEPP. In my opinion, that’s all that really matters for this meeting. The inflation numbers and looser financing conditions (compared to the middle of this year) will be why the hawks on the governing council call for a taper. I’ve been keeping a close eye on the 10-year Bund yield and BTP-Bund spread, which have both ticked up higher of late (indicative of the market pricing in less stimulus prior to Thursday’s meeting?).

The euro had begun to price in hawkish expectations and this created downside risks on a dovish surprises (i.e. no taper). Although the euro has pulled back a bit now, I still think if Madame Lagarde chooses not to alter the pace of PEPP and leave it as is - it could put some further pressure on the single currency, ceteris paribus. If we do get a taper then there might be some juice left to squeeze out of the euro, however, dollar strength could be a headwind. I think it’s too early to hear more intricate details about further stimulus (APP) in a transition to a post-PEPP world, we will likely hear about that at the end of the year.

I’d expect any taper to be accompanied by a dovish twist in typical ECB fashion as we saw with the RBA on Tuesday. This could be achieved by using dovish language such as emphasizing the flexibility of PEPP and that the pace of asset purchases could easily be increased again if financial conditions warranted such a move, as well as policy settings remaining accommodative even after PEPP concludes. With circa €500bln left in the PEPP envelope, a taper of €20bln/month from €80bln/month currently to €60bln/month would mean the programme would run beyond March 2022. As it stands the programme is expected to be wound up in March 2022, which would mean the envelope is not exhausted (if taper occurs) - now that could be interpreted quite hawkishly by some if communication is not solid by Lagarde. A fair compromise for the hawks and doves would probably be to taper and extend PEPP purchases past March 2022, making sure the full envelope is utilised. An expansion of the envelope would be a non-starter for the hawks unless there was a serious external shock and setback economically.

We’ll also be receiving updated economic projections from the ECB tomorrow. It’s a consensus view that growth and inflation will be upgraded. The economy outperformed the June GDP forecasts for Q2 of 1.4%, with the final estimate coming in at 2.2% on Tuesday. Coupled with easier financial conditions, an increase in vaccinations, improved crude prices, supply chain bottlenecks and a weaker euro throughout most of Q3 this should result in better GDP growth and inflation forecasts. The inflation profile will follow the playbook of steeper across 2021 and 2022 with a decline into 2023 - indicating the transitory views of the ECB. To change that view we’d have to see robust and persistent wage growth. 2023’s number will be key to inform us how far away inflation is from their target of 2%. The ECB faces an uphill battle to lift inflation to its new 2% target on a durable basis, especially if history is anything to go by. This rases the issue of credibility for the ECB in terms of achieving their new target.

In the ECB’s new forward guidance, we know that interest rates aren’t going anywhere until inflation reaches two percent well ahead of the end of the ECB’s projection horizon and must remain at that level sustainably. Money markets are pricing for lift-off by September 2024. There is a risk of this date being brought forward on a hawkish taper (not softened by dovish rhetoric) as well as a chunky inflation revision upwards for 2023. This could see a bid in euro crosses.

EURUSD:

Preview

The euro had been gaining against the dollar, despite the recent pullback price is still above its 50-day SMA and upper trend line of its descending channel. But now it looks like the 1.19 resistance is proving too much with a potential double top in the making. The RSI looks to have peaked and is rolling over back towards the 52 level. Upside targets remain 1.19 resistance and above there 1.20 around the 200-day SMA would be next. On the downside 1.18 (50-day SMA) and 1.175 support would be important levels.

EURGBP:

Preview

EURGBP has been treading water over the last 2 weeks, bumbling about the 0.8550 support and 0.86 resistance. For those with a bearish bias, I'd like to see price candles back below the 50-day SMA. The 21-day EMA seems to be working as a form of dynamic support for price dips. The RSI moved towards 61 resistance (marked previous price rallies) and rolled over but is now seeing a slight bounce back to this level. Targets on price moves upwards are around 0.86 and 0.865. On the downside, 0.855 around the 50-day SMA and then 0.85 lower from there.

Ready to trade one of the opportunities above? Start trading FX CFDs now

Related articles

Could stagflation be the smoking gun for higher volatility in markets?

Could stagflation be the smoking gun for higher volatility in markets?

US500
US
The GER40 - trading the biggest shakeup in the DAX since 1988

The GER40 - trading the biggest shakeup in the DAX since 1988

DAX

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading Accounts
  • Premium Clients
  • Active trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indices
  • Commodities
  • Currency indices
  • CFD Forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Meet our Analysts

Learn to Trade

  • Trading Guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
+254203893547
The Oval | Ring Road Parklands
P.O.Box 2905-00606 | Nairobi, Kenya
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Sitemap

Risk Warning:

Margin trading products are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading on margin with this provider. You should consider whether you understand how margin trading works and whether you can afford to take the high risk of losing your money. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your personal objectives, financial circumstances, or needs. Please read our PSF, RDN and other legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Pepperstone Markets Kenya Limited 2nd Floor, The Oval, Ring Road Parklands, PO Box 2905-00606 Nairobi, Kenya is licensed and regulated by the Capital Markets Authority.

© 2025 Pepperstone Markets Kenya Limited | Company No.PVT-PJU7Q8K | CMA License No.128