ECB Decision to Be Based on Comprehensive Data

[Ben Graham]

This week, the European Central Bank will conduct a thorough data-driven assessment of its upcoming agenda to evaluate the impact of U.S. tariffs on economic growth and inflation.

The key event will be the release of the first estimates of the eurozone's gross domestic product (GDP) for the third quarter of this year, which will come just a few hours before the ECB announces the results of its two-day monetary policy meeting.

The preliminary GDP data will serve as a barometer of the region's economic health. Analysts expect a modest increase, but given the global economic slowdown and ongoing geopolitical risks, there is a possibility that the actual figures may fall short of expectations. In that case, the ECB may be forced to reconsider its monetary policy and take additional steps to stimulate the economy.

The ECB's decision on interest rates and the subsequent press conference by ECB President Christine Lagarde will be key moments for understanding the regulator's future actions. The ECB is expected to keep rates unchanged; however, investors will closely watch for any signs of further monetary policy easing.

Such signals could appear in Lagarde's rhetoric, revisions to inflation and growth forecasts, or details of asset purchase programs. Any hint that the ECB is ready to provide further economic stimulus could lead to a decline in the euro and a rise in European asset prices. Conversely, a more hawkish stance could trigger the opposite reaction in the markets.

Almost as important will be the October inflation figure, which will be released the following day. It is expected to decline to 2.1% from 2.2% in the previous month. The ECB will also publish its bank lending survey, which will help assess how smoothly monetary policy is transmitting to the real economy.

At present, consumer confidence remains low despite a resilient labor market, and the GDP data will show whether the recovery in private consumption is continuing or not. Against the backdrop of weak domestic demand, external pressures, and low capacity utilization in the manufacturing sector, many economists see a risk that investment activity will not recover as quickly as previously expected — a negative sign for the economy.

EUR/USD Technical OutlookCurrently, buyers need to focus on reclaiming the 1.1650 level. Only then will they be able to target a test of 1.1675. From there, the pair could rise toward 1.1725, but achieving this without support from major players will be quite difficult. The ultimate target would be the 1.1755 high. In case of a decline, I expect significant buying activity to appear around 1.1620. If no large buyers are present there, it would be better to wait for a renewal of the 1.1600 low or to open long positions from 1.1580.

GBP/USD Technical Outlook For pound buyers, the immediate task is to break through the nearest resistance at 1.3335. Only this will allow targeting 1.3355, above which it will be quite difficult to advance. The ultimate target would be the 1.3385 level. In case of a decline, bears will attempt to regain control around 1.3305. If they succeed, a breakout of this range would deal a serious blow to the bulls' positions and push GBP/USD down to the 1.3280 low, with potential for a further move toward 1.3250.

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