ECB Rate Hike Triggers Sell-the-Fact Pullback Fears

The European Central Bank (ECB) is set to raise its deposit facility rate by 25 basis points on Thursday, but the market's expectations are already priced in. Despite this, traders will be closely watching the ECB's inflation projections and guidance, particularly how they view rising energy costs.

The current rally in EUR/USD may face a sell-the-fact pullback if traders were hoping for a more hawkish message from the ECB. This could lead to a retracement towards the August VPOC (1.15366), 1.15 handle, and July high before bulls can step back in.

Futures market exposure supports the broader bullish trend for EUR/USD, but price action and sentiment among futures traders hint at weakness over the near term.