On Thursday, the European Central Bank (ECB) kept its monetary policy unchanged as expected. Analysts from Danske Bank continue to see the EUR/USD pair in the 1.20-1.24 range in the short-term and moving toward 1.15 in a year.
“President Lagarde presented a more optimistic economic outlook given the progress on the vaccination campaign and substantial additional fiscal policy measures (NGEU and US packages). Both the growth and inflation projections for 2021 and 2022 were revised up significantly, accompanied by higher core inflation forecasts. ECB expects a further acceleration in economic activity in H2 21 on the back of a pick-up in consumer spending, strong global demand and accommodative fiscal and monetary policies. Growth risks are now seen as broadly balanced, but uncertainties remain regarding the course of the pandemic and how the economy responds after reopening.”
“In line with our expectation, ECB optimism came through in forecasts on growth and inflation. As often has been the case, such optimism is mildly positive for EUR/USD as well. Overall though, the short-term outlook will likely continue to be that spot remains in the recent range of 1.20-1.24 and measures of volatility are also coming lower too. The next focus for spot will turn to FOMC and PMIs which do have the scope to take spot to end-point of these intervals (in both directions). Looking ahead, we continue to expect EUR/USD to move towards 1.15 in 12m.”
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