EUR/USD Downtrend Likely Over After ECB Pledges to Ramp-Up Bond Buying

EUR/USD Downtrend Likely Over After ECB Pledges to Ramp-Up Bond Buying

Investing.com – The euro jumped against the dollar and looks set to snap its two-week losing streak as experts suggest that the single currency’s downward trajectory is likely over for now following the latest’s European Central Bank monetary policy meeting on Thursday.

EUR/USD rose 0.48%, to $1.1983.

“On what we’ve seen today the EUR has stabilised and there’s been no meaningful drop below our 1.1850 outlined support in recent days,” National Bank Australia said following the ECB’s monetary policy meeting and press conference from central bank president Christine Lagarde.

The European Central Bank left rates unchanged at 0.00%, as expected, but did pledge to step up its pace of bond purchases to stem the rise in European bond yields and keep financial conditions steady.

“While the ECB today predictably left unchanged its main policy parameters, including its interest rates and the EUR1.85 trillion PEPP ceiling, the Governing Council’s post-meeting statement went further than expected in addressing concerns about its willingness to tolerate the recent upwards shift in yields,” Daiwa Capital markets said in a note.

The euro looks set to trade in a range between $1.22 and $1.23 before stepping up gains to reach $1.26 by mid-year as the vaccine-led recovery takes shape.

“[W]e don’t see reason to chase the [euro] lower, unless the situation on the European vaccine side really deteriorates,” National Bank Australia added.  “Right now, it’s a case of Europe being a couple of months or so behind, but by the summer the northern hemisphere should be pretty much on the same page.”

The sentiment on the eurozone recovery echo the view laid out by the bank on Thursday.

The ECB upped 2021 GDP to 4.0% from 3.9% in December, and forecast that growth rise above pre-pandemic levels in the middle of next year. For 2022, however, it cut its forecast to 4.1% from 4.2%.  

“Looking ahead, the ongoing vaccination campaigns, together with the gradual relaxation of containment measures – barring any further adverse developments related to the pandemic – underpin the expectation of a firm rebound in economic activity in the course of 2021,” Lagarde said.

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