Dovish ECB Tone Hit the Euro


The ECB kept policy unchanged, which helped the euro develop intraday gains right up to Lagardes press conference. However, the European Central Bank presidents comments should be seen as very dovish, weighing on the euros strength. It wont be surprising if we soon see a new battle for 1.2000 in EURUSD.

In particular, Lagarde has said that it is too early to discuss a withdrawal of stimulus. Like the Fed, the ECB pointed out the temporary nature of inflation and warned that they would look through its nearterm spike.

Besides, Christine Lagarde lamented that it is unlikely to follow in tandem with the Fed. This is a clear hint that the ECB is prepared to lag somewhat behind. However, this lag is also justified by the macroeconomic implications caused by the pandemic.

So far, the Eurozone is clearly losing the vaccination race. This is reason enough to form weaker rate expectations and has the potential to make the euro an outsider against its major competitors such as the dollar, the pound and the yen.

Source FXPro


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