- Eurodollar reversal from 1.0090 extends below parity.
- The euro accelerated its downward trend after the ECB’s decision.
- EUR/USD: Recent developments make 0.93 — MUFG target less likely.
The euro has trimmed its recent gains on Thursday to end a four-day rally. EUR/USD pulled back from six-week highs just below 1.0100, returning to levels below 1.0000 on the rally of the US dollar.
The euro sinks after the ECB decision
The reversal of the common currency accelerated after the publication of the monetary policy decision of the European Central Bank. As expected, the bank raised rates by 75 basis points for the second consecutive time, in an attempt to control historical inflation, raising the deposit rate to 1.50%.
Additionally, ECB President Christine Lagarde reiterated the bank’s commitment to continue raising rates, despite downside risks to the economy that could lead to higher unemployment levels.
On the other hand, the US dollar has left behind the weakness of the previous days and has registered a moderate recovery. The US GDP reading, which has shown an unexpected economic expansion of 2.6% in the fourth quarter, has eased concerns about a recession, boosting the dollar again.
EUR/USD: Recent developments make 0.9300 target less likely — MUFG
Currency analysts at bank MUFG note that recent developments and dollar selling make the 0.9300 target less likely: “In general, recent developments, including the natural gas price crash in Europe and the broad sell-off of Dollars have made EUR/USD less likely to fall as low as our year-end target of 0.9300, even after today’s less aggressive ECB policy update.”
Technical levels to watch
Source: Fx Street
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