The aggressive turn in the European Central Bank’s (ECB) tightening plan suggests that it will act on a “whatever it takes” basis to contain inflation, so the EUR may find solid support if the Ukraine conflict is contained. However, a drop to the 2020 low at 1.0635/40 cannot be ruled out, Westpac economists report.
Change in EU and ECB coordination likely to support EUR
“The ECB President, Christine Lagarde, declared that more optionality or flexibility was needed to deal with the growing risks (of stagflation). This clear hawkish tilt reflects an equally dramatic, if less obvious, change in the finance ministers of the The EU and the Eurozone are now open to coordinated regional fiscal support to help households cope with rising energy prices, speed up the energy transition, raise spending on security and support regional economies. The EU/Eurozone ‘whatever it takes’ approach if the conflict is contained, may have put a floor under the vulnerable EUR”.
“Even if the preliminary PMI and IFO data reflect the ZEW surveys, the change in coordination between the EU and the ECB is likely to provide support for the EUR.”
“The EUR/USD remains vulnerable to a retest of 1.08 and a drop to 1.0635/40 lows cannot be ruled out touched in 2020, but risks appear more balanced and a close above 1.11 could establish a firmer range for EUR/USD.”
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
