EUR Rallying on Lagarde Comments
EUR is rallying today on the back of comments from ECB president Christine Lagarde earlier this morning. Writing in a blog post today, Lagarde said: “I expect net purchases under the APP to end very early in the third quarter. This would allow us a rate lift-off at our meeting in July, in line with our forward guidance. Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.”
In terms of the likely pace and scale of ECB tightening, Lagarde noted “This means that it is sensible to move step by step, observing the effects on the economy and the inflation outlook as rates rise.” With this in mind, a .25% hike at both the July and September meetings would be the central scenario for traders to expect.
Given that the ECB has not raised rates in over a decade, such a shift in narrative is likely to keep EUR well supported near term as divergence in monetary policy between the ECB and other G10 central banks fades.
The reversal higher in EURUSD has seen the market breaking above the recent bearish trend line from April highs and back above the broken bear channel lows. Price is now back atop the 1.0553 level and, with both MACD and RSI moving higher here, the focus is on a continuation higher near-term.