- EUR/USD is ending the week on a sour note and has dropped back under 1.2100.
- USD buying into the month-end is the main driver, but dovish ECB rhetoric isn’t helping.
What looked like a promising week for the euro is ending on a sour note. Having hit seven-week highs in the 1.2240s on Thursday (up more than 1.0% at the time), the currency pair has reversed sharply and is now back beneath the 1.2100 mark and at fresh lows for the week in the 1.2070s. On the day, EUR/USD is now down roughly 0.75% or about 90 pips. That means its losses on the week stand at about 0.3% or close to 40 pips.
ECB officials have dialed up the dovish rhetoric and this appears to be weighing on the euro on Friday, though month-end USD buying appears to be the main driver; risk-sensitive AUD, NZD and CAD are suffering to an even greater extent on the day versus the US dollar, down 1.9%, 1.6% and 0.9% respectively. Moreover, on the week, the euro is actually the best performing G10 currency versus the USD, with GBP in second place, down 0.4%.
Dovish ECB signals more QE incoming
From the outset of the week, the ECB has been the most dovish sounding of the major developed market central banks with regards to the recent rising in long-term government bond yields. On Monday, ECB President Christine Lagarde said the ECB will closely monitor long-term interest rates. Throughout the week, numerous other ECB officials reiterated the same line, all hinting at potential action.
But on Friday, ECB Governing Council Member Yannis Stournaras went one step further to become the first member of the ECB to an outright call for an increase to the pace at which the ECB buys government bonds in order to address what he called an “unwarranted tightening of financial conditions”. The Greek central banker said that there is no fundamental justification for a tightening of nominal bond yields at the long-end.
Euro traders will be closely watching the release of weekly Pandemic Emergency Purchase Programme data next Tuesday for any indications that the bank stepped up its bond-buying efforts this week. Signs that it has increased the pace of asset purchases could be taken as a dovish signal and hurt euro versus currencies whose central banks have taken a more sanguine view of the recent rally in bond yields (like USD and GBP).
|Today last price||1.208|
|Today Daily Change||-0.0083|
|Today Daily Change %||-0.68|
|Today daily open||1.2163|
|Previous Daily High||1.2243|
|Previous Daily Low||1.2156|
|Previous Weekly High||1.217|
|Previous Weekly Low||1.2023|
|Previous Monthly High||1.235|
|Previous Monthly Low||1.2054|
|Daily Fibonacci 38.2%||1.2189|
|Daily Fibonacci 61.8%||1.221|
|Daily Pivot Point S1||1.2132|
|Daily Pivot Point S2||1.21|
|Daily Pivot Point S3||1.2045|
|Daily Pivot Point R1||1.2219|
|Daily Pivot Point R2||1.2274|
|Daily Pivot Point R3||1.2306|
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.