EUR/GBP – ECB delivers dovish final rate hike of the tightening cycle

  • ECB raises rates another 25 basis points but signals it may be the last
  • New forecasts show stubborn inflation but weak growth
  • Close above 55/89-day SMA band suggests breakout still valid

The ECB raised interest rates again today, probably for the last time in the tightening cycle although it did leave itself some flexibility on that front.

This certainly falls into the dovish hike category, with the ECB acknowledging inflation remains too high but also that growth is suffering. What’s more, it clearly indicated that it believes the current stance should be tight enough to return inflation to target, given time.

It would appear the decision wasn’t unanimous though, with only a solid majority backing the decision. Again, we shouldn’t be surprised at this stage of the cycle that, considering the uncertain outlook, not everyone is in agreement on their assessment of the situation.

The euro slipped after the decision and following comments from President Christine Lagarde, as did euro area yields. Further progress on inflation over the coming months, as the ECB anticipates, should enable pauses over the coming meetings, at which point the focus will gradually shift to the timing of the first rate cut.

EUR/GBP – Another BoE hike likely as UK wage growth continues to rise

Does the dovish hike change the outlook for the pair?

Not necessarily. While markets were leaning towards a pause today, it was always expected to be either a dovish hike or a hawkish hold.


Source – OANDA on Trading View

The difference that would mean for the euro probably isn’t enormously different as the terminal rate would highly likely have been the same. But does the chart confirm this or not?

It’s hard to say whether it confirms it but what I would say is the decline we’ve seen in the pair doesn’t necessarily change it in a bearish way. The pair had already broken 55/89-day simple moving average band and closed above it so, in my opinion, this corrective move does invalidate that.

The fib levels for the September lows to highs may offer clues on whether the decline we’ve seen today and yesterday is corrective or just bearish.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam