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16 Mar 2023

EUR/USD regains 1.0600 and beyond ahead of ECB

  • EUR/USD partially fades Wednesday’s acute pullback.
  • The ECB is expected to hike rates by 50 bps later on Thursday.
  • Focus will be on Lagarde’s press conference and updated projections.

The single currency gives some signs of life and motivates EUR/USD to reclaim the area above 1.0600 the figure on Thursday.

EUR/USD looks bid on ECB-day

EUR/USD regains some upside traction and trims part of Wednesday’s sharp decline to fresh monthly lows near 1.0510 amidst alleviated risk aversion and fresh selling pressure around the greenback.

The pair, in the meantime, trades with decent gains ahead of the ECB monetary policy meeting, where the central bank is largely expected to hike interest rates by 50 bps. In addition, the central bank will publish its updated macroeconomic projections, while investors will closely follow the press conference by Chairwoman Lagarde regarding the potential next steps by the ECB as well as any mention on the European banking system in light of the recent news around Credit Suisse.

In the domestic calendar, final inflation figures in Italy showed the headline CPI rose 9.1% in the year to February. In the US, usual weekly Claims are due seconded by the Philly Fed Manufacturing Index.

What to look for around EUR

EUR/USD manages to leave behind some of the recent weakness and retakes the 1.0600 hurdle and above in pre-ECB trading on Thursday.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB past the March meeting, when the bank has already anticipated another 50 bps rate hike.

Key events in the euro area this week: ECB Interest Rate decision, ECB Lagarde (Thursday) – EMU Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is advancing 0.32% at 1.0609 and the breakout of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the other hand, the next support emerges at 1.0516 (monthly low March 15) seconded by 1.0481 (2023 low January 6) and finally 1.0323 (200-day SMA).

Mar 16, 2023

USD/CAD trades with modest losses below mid-1.3700s, downside seems cushioned

The USD/CAD pair extends the previous day's modest pullback from the vicinity of the weekly high, around the 1.3815 region, and remains under some sel
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Mar 16, 2023

USD/JPY: Further decline remains on the cards – UOB

While further downside in USD/JPY appears likely, a test of 131.50 seems not favoured in the near term, comment UOB Group Quek Ser Leang and Senior FX
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