ECB raises key rates by 50 bps in July monetary policy decision vs 25 bps expected

• Prior decision
• Deposit facility rate 0.00% vs -0.25% expected
• Main refinancing rate 0.50% vs 0.25% expected
• Marginal lending facility 0.75% vs 0.25% prior
• Decision to raise by 50 bps is based on updated assessment of inflation risks
• ECB approves of Transmission Protection Instrument (TPI)
• Further normalisation of interest rates will be appropriate
• Frontloading strategy allows ECB to make a transition to a meeting-by-meeting approach
• The establishment of the TPI is necessary to support the effective transmission of monetary policy
• TPI can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy
• PEPP reinvestments remains the first line of defence to counter those risks though
• Full statement

The euro has jumped on the decision with EUR/USD EUR/USD The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, be The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, be Read this Term moving up from 1.0195 to 1.0250 as the ECB chooses to frontload its interest rate increases. In my view, it is a bit careless as their communication through all these months have been to push for a 25 bps rate hike but it is what it is.

The introduction of the TPI mechanism is mainly to counteract fragmentation risks but there isn't much clarity or details on that, as you would expect considering the short amount of time given to establish things.

The euro may be cheering now but as mentioned here, traders may be leaving disappointed when the dust settles. In any case, EUR/USD is still yet to breach key resistance closer to 1.0283 - the 50.0 Fib retracement level.