EUR/USD: ECB’s current approach to support Euro

The ECB prepared the market well for today’s rate meeting. Esther Reichelt, FX Analyst at Commerzbank, notes that the Euro is well positioned to strengthen against the US Dollar.

Euro goes well prepared into the ECB meeting

“A 50 bps rate hike is seen as a fait accompli. It is therefore likely to be decisive for the Euro what ECB President Christine Lagarde has to say about the March decision and the rate path beyond that. If Lagarde signals that a further 50 bps rate is not set in stone I think the Euro will get under selling pressure.”

“As long as no reversal becomes obvious in core inflation the market is likely to price in an increased risk premium of inflation not easing towards its target as expected. Against this background, the ECB’s current approach – of sticking to ‘larger’ rate step for now and not committing beyond that – is appropriate from the FX market’s point of view which supports the Euro.”

“An end of the monetary policy tightening seems more certain for the Fed than for the ECB. That does not necessarily mean that the EUR will appreciate significantly from here. However, the risk of the ECB having to top up its measures further because upside risks for inflation emerge, thus supporting the Euro, are currently likely to be considered higher than further appreciation potential for the USD.”

See – ECB Preview: Forecasts from 14 major banks, another 50 bps hike

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.