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Trading financial products on margin carries a high degree of risk and is not suitable for all investors. Please ensure you fully understand the risks and take appropriate care to manage your risk.

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Market Insights

The ECB preview Sept 2022 - turning up the rate dial… are you tuned in?

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Upcoming Event - Thursday September 8, 2022

  • European Central Bank (ECB) Interest Rate Decision
  • Governing Council of the European Central Bank (ECB): Monetary Policy Meeting in Frankfurt Germany

Focus points:

  • Will the ECB raise 0.5%, 0.75%, or perhaps higher?
  • As of July 2022, the Euro Area interest rates stands as follows:
Effective date Deposit facility Fixed rate tenders Marginal lending facility
July 27 2022 0.00% 0.50% 0.75%
September 8 2022 ? ? ?

Should you be planning for this event?

What could other euro area asset traders and investors be planning for in the coming days and months?

  1. Positioning
  • How will euro based assets perform if Euro Area interest rates hit 1.5% or higher during the remainder of 2022?
  • Is my portfolio positioned for such a case?
  1. Trends
  • How important is the September ECB rate decision to determine the magnitude of the trend of euro area interest rates?
  • Is now the time for a trend following trading strategy? If so, what are my trading price targets?
  1. Capture volatility or avoid it?
  • To what extent will the September ECB rate decision have on the prices of Europe area asset prices such as EU stocks, indices, bonds and EUR FX pairs?

Main points of ECB Policy statements from its July meeting

What we know according to the previous July ECB policy statement:

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  • ECB raised interest rates by 0.5% (50bp) basis points, and they indicated more rates hikes to come
  • New transmission protection instrument (TPI) was agreed on to make sure policy “smoothly” reaches all the euro area via a type of anti-fragmentation bond purchasing scheme, ECB will provide more details on how this new instrument will work
  • ECB acknowledged that inflation will stay higher in the “near term”
  • ECB acknowledged that the EU economy is growing more slowly because of higher inflation & energy supply problems

A record number of people have jobs in the Euro area

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People are earning more in the Euro area

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Euro area spending remains elevated

Although slowing in recent reports due to energy uncertainty as europeans head into winter

Euro area data does not look tragic; the ECB knows this and that’s why the ECB seems confident that the economy can handle higher rates

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Not investment advice. Past performance does not guarantee or predict future performance.

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