ECB Quick Analysis: Three ways Lagarde is leveling up EUR/USD


  • The ECB has opened the door to squeezing bond buys if conditions improve.
  • President Lagarde's mentions of the exchange rate remain muted. 
  • The euro benefits from Lagarde's words that the downside risks are "less pronounced." 

Subtle changes to language can be meaningful to EUR/USD traders – the European Central Bank has left its interest rates unchanged but seems more upbeat, allowing EUR/USD to rise.

Here are three changes that have pushed the common currency higher and may continue doing so.

1) Perhaps not all the support is necessary

In the statement, the Frankfurt-based institution probably conceded to German hawks, stating that it might not use the full envelope of its bond-buying scheme. If conditions improve, it would refrain from deploying the "full envelope" of the Pandemic Emergency Purchasing Program. 

2) Nothing huge on the exchange rate

Christine Lagarde, President of the European Central Bank, stated that the exchange rate is a drag on inflation – yet is one of many factors dragging prices lower. Not only is her comment on the euro's high value relatively muted, but it is also far from what markets expected.

Given the recent weakness in the Consumer Price Index, some anticipated starker language and perhaps a hint that the bank is ready to act. That did not materialize. The ECB seems to tolerate an increase in the euro. 

3) fewer downside risks

Lagarde listed the positives such as vaccines, political certainty around Brexit and the US elections, and a strong manufacturing sector. She also expressed concern about the virus's resurgence, including the variants. 

What is the bottom line? The risk to the growth outlook remain tilted to the downside but are less pronounced – thus serving as a bullish shift. 

All in all, the ECB seems cautious, but also optimistic and far from thinking about a move that would lower the euro – a rate cut. 

EUR/USD Price Forecast 2021: Euro-dollar long-term bullish breakout points to 1.2750

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.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD attempts recovery above 1.1950 as US dollar bounce fizzles

EUR/USD is attempting a recovery above 1.1950 ahead of the European open, as the US dollar’s rebound falters amid persistent weakness in the Treasury yields. Easing concerns over EU's covid vaccines rollout and dovish Fed expectations underpin the spot.

EUR/USD News

GBP/USD recovers to 1.3850 as UK’s optimism offsets USD bounce

GBP/USD recovers to 1.3850, picking up fresh bids heading into the London open. The cheers the UK’s advantage of faster vaccinations and unlock guidelines to shrug off the US dollar’s bounce off late the lowest since late March.

GBP/USD News

Gold gathers strength to test $1800 as USD remains vulnerable

Gold remains on track to challenge the $1800 barrier. The yellow metal extended its two-day winning streak to reach fresh two-month highs at $1784 on Friday, recording the second straight weekly gains. The USD recovery appears shallow amid subdued Treasury yields.

Gold News

Bitcoin network hash rate drop may not have caused BTC price crash

China’s prominent regions for Bitcoin mining have suffered an electrical grid blackout, causing Bitcoin’s hash rate to decline. Bitcoin price crashed over the weekend, coinciding with the drop of the network’s hash rate.

Read more

S&P 500 Week Ahead: Banks beat the street, COIN booms as funds flow to ETFs

Equity markets continue to remain bolstered from all sides as the macro environment produces strong numbers, earnings continue to smash estimates and inflation concerns take a back seat. Earnings season switches from bank stocks to reopening plays.

Read more

Majors

Cryptocurrencies

Signatures