EUR fell. ECB rhetoric is dovish (though the extent of dovishness can be debatable), OCBC’s FX analysts Frances Cheung and Christopher Wong note.
Focus next shifts to German politics
“During the press conference, President Lagarde reiterated that the direction for policy was ‘very clear.’ President Lagarde stated that the Council would debate the neutral rate ‘in due course’ but that a discussion remained “premature” at this stage. Lagarde also mentioned that 50bp cut was discussed though 25bp cut decision was unanimous. Growth concerns remain on policymakers’ radar.”
“EUR was at 1.0465 levels. Mild bullish momentum on daily chart is fading while RSI fell. Risks skewed to the downside. Support at 1.0460, 1.0410 levels. Resistance at 1.0525 (21 DMA), 1.0540 (23.6% fibo retracement of Oct high to Nov low), 1.0670 (38.2% fibo).”
“Chancellor Scholz has called for a vote of confidence on Wed and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025. Far-right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024.”
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