The main event of the day today will be the meeting of the European Central Bank. Bloomberg economists are divided on expectations in regard to the size of the rate hike, with just over half of them predicting the ECB will raise rates by 75 bps, and just under half believing a 50 bps outcome is more likely. You can count on the fingers of one hand those who expect a 25 bps rate liftoff. The more stable position of the Euro (against, for example, the pound sterling) is explained by the fact that some investors expect an aggressive outcome (75 bp) and do therefore not sell Euro. Therefore, if the ECB prefers to lift interest rate by 50 bps it is highly likely that investors will start to unwind their long Euro positions, which will result in a EURUSD downfall. Also, investors’ attention will be focused on the ECB staff economic forecasts in order to understand the scale and depth of the recession that the regulator expects, on which the future course of monetary policy will depend.

The dollar has moved into a decline as investors take profits after a significant rally. The trend on the weekly chart remains upward, but the candlestick pattern raises the chances of consolidation or a modest downside before the upward move resumes:

Powell will speak later today and traders should pay high attentionto his speech, as this is the first speech of the head of the Fed since his comments in Jackson Hole, furthermore, there has been a significant increase in US bond yields and it is important for investors to assess whether the Fed is satisfied with the current market pricing of the interest rate path.

Despite some recovery for major European currencies (GBP, EUR) in the second half of the week, the energy crisis on the European continent continues to present great uncertainty, which forces investors to reduce or at least not increase the share of European assets in their portfolios. As mentioned above, investors take profits after the dollar rally, preferring to wait for the outcome of the ECB meeting, which also played a role in the recovery of the European currencies. If the ECB disappoints and opts for a moderate tightening, the dollar correction may prove to be a fleeting one.