The ECB’s change of tone could allow a rebound in the euro
EUR/USD has particularly fallen since the beginning of the year to reach its lowest level since 2017 at $1.0350. The euro is back to test this threshold, after trying to bounce there once in May.
The EUR/USD has recently been penalized by more persistent than expected inflation in the United States, which points to an even stronger than expected monetary tightening from the Fed. Nevertheless, the tides are starting to turn in favor of the single currency thanks to the ECB’s increasingly hawkish tone.
The European Central Bank is in turn becoming more and more aggressive in the face of persistent inflation, including among the members most traditionally favorable to an accommodative monetary policy. The ECB said it would start raising rates as early as next month, and should continue to do so at each of its next meetings until at least the end of the year.
At least that is what investors are currently anticipating, but they could continue to revise their forecasts upwards if the inflation figures in the euro zone also continue to be higher than expected.
EUR/USD daily price chart – key levels