- EUR/USD looks volatile between 1.2150 and 1.2200.
- The ECB revised up its 2021/22 inflation, growth forecasts.
- US headline CPI leaps to 5.0% YoY in May.
The daily performance of EUR/USD keeps the erratic course so far in the 1.2150-1.2200 range on Thursday.
EUR/USD bid post-ECB, US CPI
EUR/USD now alternates gains with losses after the ECB left its interest rates unchanged, as widely anticipated.
At her press conference, Chairwoman Christine Lagarde reiterated that risks remain broadly balanced. In addition, the ECB boosted both its inflation and GDP forecasts. Indeed, the central bank now see inflation tracked by the HICP at 1.9% in 2021 and 1.5% in 2022, while the economy is expected to expand 4.6% this year and 4.7% the next one.
Regarding the labour market, Chief Lagarde noted some movement, or whatever that means.
Lagarde also deemed as premature any exit of the current monetary policy stance, while she commented that purchases of bonds under the PEPP will be flexible. She stressed that the Council did not discuss options on longer-term policies, while there were some debate regarding the bond purchases pace.
What to look for around EUR
Last week’s sell-off in EUR/USD met solid support around the 1.2100 neighborhood. The subsequent bounce managed to re-test the key 1.2200 level, leaving the perspective on the positive side at least in the very near-term. Looking at the broader scenario, the constructive perspective in the European currency stays in place and appears propped up by auspicious results from fundamentals in the bloc coupled with higher morale. Prospects are for a strong rebound in the economic activity in the old continent in the months to come and the investors’ appetite for riskier assets.
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities.
EUR/USD levels to watch
So far, spot is losing 0.09% at 1.2167 and a break below 1.2063 (23.6% Fibo retracement of the November-January rally) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5). On the flip side, the next up barrier emerges at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).
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