EUR peaked above 1.08 ahead of ECB policy decision – Scotiabank
|The ECB policy decision this morning is less about the expected 25bps cut—it’s fully priced in—than how the policy outlook is communicated, Scotiabank's Chief FX Strategist Shaun Osborne notes.
Market focus is on the rate outlook
"The significant boost to fiscal policy from the German government this week and the likelihood of generally looser fiscal policy across the Eurozone as Europe arms up has put a big question mark over how much further rates are likely to fall in the coming months. Policymakers were already starting to hint that rates were approaching neutral. Significantly looser fiscal policy may see policy err on the side of more restrictive, if only slightly so, in the coming months."
"Note that swaps anticipate a little less easing from the ECB over the balance of the year, with the policy rate expected to base around 2.00%. Note that narrower EZ/US spreads continue to suggest spot is still quite significantly undervalued, despite this week’s surge. Our fair value estimate sits at 1.0962 today."
"The EUR’s powerful rally may be stalling around the 1.08 point—1.0804 represents the 61.8% Fibonacci retracement of the 1.12/1.01 decline seen in the past few months. Intraday trading patterns strongly suggest a short-term peak at least. But corrective losses may only extend to the low 1.07 area—support is 1.0720/25—given the bullish position of short– and medium-term trend oscillators. Above 1.0805, spot gains should extend to 1.0970/75."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.