On April 7, the European Central Bank hiked the interest rate on the Euro to 1.25, and proclaimed that it was the first one of more rate hikes to come.

This is an interesting development considering that things in Europe don’t look great. However, this could be a sign of things to come for other central banks. Interest rates have been held low for an extended period of time and, regardless of what they say, this has caused some global imbalances. It’s only a matter of time before the other central banks have to follow suit and start normalizing rates.

Euro traders responded to the news by buying the Euro. The EUR/USD rose by 200 pips in the following 48 hours. While I personally still can’t bring myself to follow that trend with the fundamental issues that are still pending, the trade is the trade. The Euro looks poised to continue higher over the next few months unless something drastic happens.

What is your Euro Trade?