EURUSD PRICE JUMPS BACK ABOVE MID-1.0200S AFTER ECB’S 50 BPS RATE HIKE MOVE

• EURUSD refreshed its daily high after the ECB raised interest rates by 50 bps vs 25 bps expected.
• The risk of a sovereign debt crisis in Italy could hold back traders from placing fresh bullish bets.
• Investors now look forward to ECB President Lagarde’s comments for some meaningful impetus.

EURUSD price gained some positive traction in the last hour and shot to a fresh daily high, beyond mid-1.0200s after the European Central Bank (ECB) announced its monetary policy decision.

As was widely expected and pre-committed, the ECB followed the global tightening trend and raised its official rates for the first time since 2011. The landmark decision to hike rates by 50 bps, as against the broader consensus for a 25 bps increase, underpinned the shared currency and provided a modest lift to the EURUSD pair.

That said, a rate hike raises the risk of a sovereign debt crisis in Italy, especially after Mario Draghi chose today to end his term as Prime Minister. This, in turn, could offset the optimism led by the resumption of Russian gas supply via the Nord Stream 1 pipeline and hold back traders from placing aggressive bullish bets around the EURUSD pair.

Investors might also prefer to wait for details of the ECB’s new anti-fragmentation tool aimed to shield highly indebted countries from surging borrowing costs. Hence, the focus remains on the post-meeting press conference, where comments by ECB President Christine Lagarde might infuse some volatility around the euro crosses.