EUR/USD steadies below 1.2200 following sharp fluctuations

After staying calm below 1.2100 during the first half of the day, the EUR/USD pair fluctuated sharply as investors assessed the European Central Bank's (ECB) policy announcements. Following a sharp drop to a six-day low of 1.2144, the pair staged a rebound but lost its momentum before reclaiming 1.2200. As of writing, EUR/USD was virtually unchanged on the day at 1.2175.

ECB keeps status quo

Following its June policy meeting, the ECB decided to leave the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected. The ECB also noted that it will maintain the total envelope of the Pandemic Emergency Purchase Programme (PEPP) at €1,850 billion until at least the end of March 2022.

During the press conference, ECB President Christine Lagarde said it was too early to talk about a 'PEPP exit' and added that there was broad agreement on the monetary policy decisions.

Citing sources familiar with the matter, Reuters reported that three ECB policymakers wanted to reduce the pace of the PEPP on improving economic prospects.

On the other hand, the data published by the US Bureau of Labor Statistics revealed on Thursday that inflation, as measured by the Consumer Price Index (CPI), climbed to 5% on a yearly basis in May from 4.2% in April. This reading beat the market expectation of 4.7% and helped the USD gather strength.

However, the greenback lost its strength with Wall Street's main indexes opening sharply higher and the S&P 500 Index reaching a new record high. At the moment, the US Dollar Index is posting small daily losses at 90.07.

Technical levels to watch for