The comment that the Euro is continuing to drift modestly higher against the US Dollar following last week´s ECB meeting at which President Draghi dampened monetary easing expectations in the near-term. With the Fed currently easing monetary policy through USD85.0 billion of asset purchases per month, the ECB’s contrasting on hold stance is gradually pushing EUR/USD higher. They note the ECB’s commitment to purchase unlimited Eurozone government bonds is also proving a sufficient backstop for now to restore investor confidence leading to an ongoing narrowing of the Eurozone sovereign credit risk premium supporting the Euro.
Further, they feel that a rising exchange rate alongside Eurozone economic under performance is increasing concern amongst European policy makers although the Euro is not yet overly strong. An attempt to talk down the Euro by Euro-group Chair Juncker, who meet in the week ahead, will likely only help to dampen upside in the near-term without support from further ECB policy easing.