The ECB policymakers are likely to discuss a rate hike worth 25 bps or 50 bps at Thursday’s meeting

The euro has been retaining a bullish tone for the third session in a row on Tuesday as the dollar stays on the softer side, correcting lower from multi-year peaks seen last week. The EURUSD pair was rejected from the levels above 1.0200 at the start of the week, trying to regain this level today. However, as traders lack decisiveness ahead of the ECB policy meeting due on Thursday, the currency could attract profit-taking following the rally.

The central bank is widely expected to hike rates by 0.25% for the first time in 11 years. The question is whether a modest hike will be enough to push the shared currency north across the board as the Fed continues to strongly outperform its European counterpart in fighting inflation. As for future hikes, the ECB is unlikely to express a decisive hawkish tone due to many uncertainties surrounding the economy, including the worsening energy crisis and pollical instability in Italy.

The recent ascent in the common currency was due to a report on the ECB policymakers that are likely to discuss a rate hike worth 25 bps or 50 bps at Thursday’s meeting. In fact, should the bank raise its rate by 0.5%, the euro will rally, at least in a knee-jerk reaction to the decision.

EURUSD extended recent gains to 1.0230 to notch nearly two-week highs. Should the buying pressure persist, the pair may target the descending 20-DMA, currently at 1.0295. However, as the dollar’s downside potential remains limited, traders will hardly be able to push the European currency through this moving average any time soon. So, the pair is likely to come under renewed downside pressure after a short-lived bounce.


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