- EUR/USD probes the area of daily lows near 1.0930.
- ECB said it will hike by another 50 bps in March.
- Lagarde noted that the bloc’s economic activity slowed markedly.
EUR/USD retreats further and flirts with the 1.0930 region, or daily lows, on Thursday.
EUR/USD: Initial resistance emerges around 1.1030
EUR/USD now accelerates its daily losses and hovers around the 1.0930 region as, Chair Lagarde’s press conference is under way.
Following the telegraphed 50 bps rate hike at today’s ECB event, Chairwoman C.Lagarde said another 50 bps rate raise is on the cards at the March meeting before evaluating the subsequent moves by the bank regarding its policy.
Lagarde also noted that the economic activity in the region slowed markedly and growth is expected to remain weak, while elevated inflation and tighter financial conditions remain a headwind for spending and production.
Lagarde also highlighted the resilience of the economy and suggested that a recovery is expected in the next months, while inflation risks have become more balanced.
What to look for around EUR
The pronounced upside pushed EUR/USD north of the key 1.1000 hurdle on Thursday, although the pair retreated markedly in the wake of the ECB event.
In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB after the central bank delivered a 50 bps at its meeting on Thursday.
Back to the euro area, recession concerns now appear to have dwindled, which at the same time remain an important driver sustaining the ongoing recovery in the single currency as well as the hawkish narrative from the ECB.
Key events in the euro area this week: Germany Balance of Trade, ECB Interest Rate Decision, ECB Lagarde (Thursday) - Germany, EMU Final Services PMI (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is retreating 0.32% at 1.0952 and the breakdown of 1.0930 (low February 2) would target 1.0802 (weekly low January 31) en route to 1.0766 (weekly low January 17). On the flip side, the next up barrier emerges at 1.1032 (2023 high February 2) followed by 1.1100 (round level) and finally 1.1184 (weekly low March 31 2022).
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