- EUR/USD regains traction following Lagarde’s press conference.
- The ECB left the monetary conditions unchanged, as anticipated.
- Lagarde said risks to medium-term outlook look more balanced.
The single currency remains bid and motivates EUR/USD to pick up extra pace and clinch new daily highs in the 1.2065/70 band on Thursday.
EUR/USD firmer on steady ECB, upbeat Lagarde
EUR/USD manages well to keep business well above the 1.20 mark, extending at the same time the multi-week rally and with the immediate target at recent peaks in the 1.2080 region (Tuesday).
The pair keeps the upbeat mood after the ECB left unchanged its monetary conditions at its event on Thursday, as largely anticipated.
At her press conference, Chairwoman Lagarde noted that the short-term outlook remains clouded, with rising coronavirus cases and lockdown measures expected to weigh on the activity.
Lagarde also suggested that a firm rebound in the economic activity looks likely later in the year, while price pressures remain depressed. On the latter, she sees inflation picking up pace in the next month albeit due to temporary drivers, which are forecast to fade away early next year.
Furthermore, Lagarde hinted at the idea that the economy might have contracted in the January-March period, although the now firmer vaccine rollout is seen sustaining a positive reading in Q2 GDP. The recovery in the euro area is seen supported by both domestic and global demand.
What to look for around EUR
EUR/USD moved to fresh peaks around 1.2080 before losing some traction amidst the resurgence of dollar demand and volatility on fresh coronavirus woes. The continuation of the rally has been so far supported by the renewed offered bias in the dollar along with the investors’ shift to the growth prospect in Europe now that the vaccine campaign appears to have gained some serious pace. In addition, solid results from key fundamentals and the improvement in the sentiment in the euro area as of late also appear to bolster the momentum surrounding the single currency.
Key events in the euro area this week: European Commission advanced Consumer Confidence (Thursday) – Flash April PMIs, ECB Lagarde speech (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund.
EUR/USD levels to watch
At the moment, the index is gaining 0.26% at 1.2064 and faces the next hurdle at 1.2079 (monthly high Apr.20) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6). On the other hand, a breach of 1.1955 (50-day SMA) would target 1.1916 (200-day SMA) en route to 1.1762 (78.6% Fibo of the November-January rally).