empty
07.12.2022 12:56 PM
ECB is considering quantitative tightening

Euro rose on Tuesday because of rumors that the ECB is seriously considering how to get rid of the €5 trillion bond balance sheet as quickly as possible. However, this did not affect the downward correction that is happening in the market.

This image is no longer relevant

Currently, the gap between German and Italian debt yields is narrowing, which could prompt politicians to announce the start of quantitative easing as early as next week. However, they could abandon it just as quickly if instability recurs. This is the challenge that the ECB is facing as there are expected to present a strategy to reduce the balance sheet, as well as an interest rate hike of 50 basis points next week. If that happens, the central bank could focus on getting the inflation shock under control next year.

The US Federal Reserve is also hinting with all its might at easing aggression, so investors expect the global cycle of policy tightening to slow down soon. However, it is clear that the ECB has to gauge risks with regard to the uncertain economic outlook, the dynamics of rate hikes and the need for governments to borrow. The shock to the UK market this year was very instructive, so officials are gradually rallying around the idea of launching QT to minimize investor fears. Another concern is how much more debt will have to be issued by governments. The ECB has warned that excessive support could cause additional rate hikes.

In terms of the forex market, a breakout above 1.0480 in EUR/USD will spur a price increase to

1.0530 and 1.0560. Meanwhile, a decline below 1.0440 will push the pair to 1.0390 and 1.0330.

As for GBP/USD, traders need to push the quote above 1.2150 in order for the pair to reach 1.2200 and 1.2265. But if pressure returns and sellers regain control of 1.2070, pound will collapse to 1.2000 and 1.1955.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

RBA Turns Increasingly Dovish, Reducing Chances of AUD/USD Recovery

The RBA cut the interest rate by 25 basis points to 3.85% on Wednesday, in line with market expectations. At the concluding press conference, the RBA Governor acknowledged that

Kuvat Raharjo 12:26 2025-05-22 UTC+2

XAU/USD. Analysis and Forecast

Gold is retreating after reaching its highest level in nearly two weeks. This pullback lacks clear fundamental triggers and is likely to remain limited due to several supportive factors. Expectations

Irina Yanina 12:21 2025-05-22 UTC+2

NZD/USD. Analysis and Forecast

The NZD/USD pair is pulling back after reaching a weekly high around the 0.5965–0.5970 level and is currently trading near 0.5920, marking a new daily low. The release

Irina Yanina 12:18 2025-05-22 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is encountering difficulties in its attempt to recover following an overnight rebound from the 1.3815–1.3810 level, indicating a continuation of the week-long downtrend. Oil prices are rebounding

Irina Yanina 12:12 2025-05-22 UTC+2

GBP/USD. Inflation, Road Tax, and the Outlook for a Northern Trend

The GBP/USD pair hit a new three-year high yesterday, reacting to a sharp spike in UK inflation. However, the significance of the inflation report should not be overstated

Irina Manzenko 11:58 2025-05-22 UTC+2

The Market Is Losing Buyers

If you harm your relationship with your neighbors, don't expect them to offer you help. Donald Trump's tariffs and subsequent coercive negotiations have diminished the willingness of other countries

Marek Petkovich 09:49 2025-05-22 UTC+2

Changes in the U.S. Tax System May Exert Localized Pressure on Market Demand (there is a likelihood of a decline in #SPX and gold prices)

The chaos and instability caused by Donald Trump, both in the U.S. and around the world, have become a regular occurrence. However, they still contribute to significant market volatility

Pati Gani 09:49 2025-05-22 UTC+2

EUR/USD Overview – May 22: A New Blow to the Dollar: "One Big Beautiful Bill Act"

The EUR/USD currency pair continued its upward movement on Wednesday. The U.S. dollar has been falling steadily for over a week—something that hasn't happened in over a month. However, every

Paolo Greco 08:10 2025-05-22 UTC+2

GBP/USD Overview – May 22: The Market Once Again Responds Clearly to Trump

The GBP/USD currency pair continued to move north on Wednesday, even though, at first glance, there appeared to be no apparent reason for it. Yes, the inflation report—the only release

Paolo Greco 08:09 2025-05-22 UTC+2

What to Pay Attention to on May 22? A Breakdown of Fundamental Events for Beginners

There are several important macroeconomic reports scheduled for release on Thursday. Business activity indexes for May's services and manufacturing sectors will be released in Germany, the Eurozone, the United Kingdom

Paolo Greco 06:31 2025-05-22 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.