In the wake of the European Central Bank’s (ECB) latest hawkish turn, EUR/USD is likely to rally to 1.1600as analysts at Societe Generale have pointed out.
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“We now expect the ECB’s asset purchases to end by the middle of the year, and that the rates increase in the second semester. The meeting on March 10 now acquires greater importance, as the plans will be much clearer by then. The front end of the yield curve is now pricing in 40 basis points by the end of the year, which seems unlikely, but that’s not a reflection of expectations and more of a hedge.”
“It is the sudden change, in relation to expectationswhich matters for European bond and currency markets, and that may increase short-term support for the euro.”
“Euro positioning was quite light going into the meeting, but this came as a real surprise to the vast majority of market participants.”
“EUR/USD can rally to say 1.16if risk sentiment remains strong.”
“If you want to buy euros, the EUR/GBP is on its way back to 0.85 and beyond. On the other hand, the EUR/JPY is also a buy attractive right now as the BoJ increasingly remains the only dovish central bank“.
Source: Fx Street
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