What is the outlook for EUR/USD, given that the ECB holds a policy meeting on Thursday?
Here is their view, courtesy of eFXdata:
Bank of America Global Research hopes for clarity and a stronger (dovish) message from this week’s ECB policy meeting.
“The only reason we see for European rates selling-off is the inability of the ECB to stop them from following the global trend. It is therefore important for the ECB this week to push against the market and re-establish its credibility. Before the recent market volatility, we had expressed strong concerns about vague and mixed ECB communication. Partly, this may be because the Strategy Review is still in progress and there is no agreement yet on the policy reaction function.
“However, markets are not waiting. A strong message from Lagarde, particularly in light of the ECB’s new commitment to keep monetary conditions supportive, ideally backed by some insights on the direction of the Strategy Review, is what markets would like to hear, in our view. If the ECB raises to the challenge next week, the market should start pricing diverging monetary policies and EURUSD should finally start weakening. It remains to be seen,” BofA adds.
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