- EUR/USD is creeping lower following ECB minutes. In the December meeting, the ECB remained optimistic on the growth outlook and there was no real discussion on new easing measures.
- There was still a lot of confidence towards higher inflation as well.
Analysts at ING explained also that the minutes of the ECB’s December meeting illustrate both the ECB’s confidence in the strength of the Eurozone economy as well as a good amount of caution but marks the transition from autopilot to driving manually.
The dollar, however, has moved to the upside with little in the way of a catalyst. It is a broad-based bid and nothing particular to the euro. However, the comment that says risk situation was “fragile and fluid” in the ECB minutes can weigh in the near term.
Fed speakers coming up
Meanwhile, the market awaits yet more Fed speak, but we have already heard a number of comments from Fed speakers this week and the FOMC minutes, so there shouldn’t be many surprises to come from today. We will hear from Powell and Bullard first and then Evans.
Looking ahead, the market is positioned for the return of the inflation trade. Data is now going to be a more prominent factor in FX markets and with the next ECB meeting due in two weeks from now, all eyes will be on how the latest set of disappointing macro data will impact the ECB’s assessment of growth in the Eurozone. “For the time being, we don’t expect any changes in the ECB’s stance; neither in terms of communication nor of real action,” the analysts at ING Bank explained.
EUR/USD levels
Analysts at Commerzbank noted that EUR/USD is consolidating in the main and remains well placed to challenge and break above the 1.1500 resistance:
“Dips lower are expected to remain well supported by the 1.1300 – 1.1267 end of November low and we favour an eventual retest of the 1.1500 region. The market faces tough overhead resistance in the 1.1500 zone but upside risks are growing longer term and a close above here (preferably a weekly close) would trigger a recovery to the 1.1623 October high and the 1.1632 200 day ma. Slightly longer term we target 1.1795, the 55 week ma.”
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