EUR/USD is trading at the highest since April 26 near 1.0680. Economists at BBH expect the pair to test the April 21 high near 1.0935 on a break past 1.0710.
Lagarde signals interest rate turnaround
“A break above 1.0710 would set up a test of the April 21 high near 1.0935.”
“European Central Bank President Christine Lagarde said the ECB is likely to exit negative rates by the end of Q3. This supports current market pricing for liftoff on July 21 with a 25 bp hike, followed by another 25 bp on September 8 which would result in a zero deposit rate. Follow-up hikes on October 27 and December 15 are fully priced in that would take the deposit rate to 0.5% by year-end.”
“To be clear, market pricing for the ECB has not shifted after Lagarde’s remarks and yet the euro got another leg higher. At some point, the subdued ECB outlook should weigh on the euro but for now, the FX market is happy to take the dollar lower.”
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