Euro Back Up After Dovish ECB – A Signal To Buy (Long-Term)? - Forex News by FX Leaders

Euro Back Up After Dovish ECB – A Signal To Buy (Long-Term)?

Posted Thursday, April 6, 2017 by
Skerdian Meta • 1 min read

This morning, the ECB shifted its rhetoric to dovish. The ECB has been dovish for years, but in recent months some of the members have increased their hawkish remarks.

That had the market (including me) believing that the ECB would tighten their monetary policy soon, starting with deposit rates seing as they´re negative.

But today, Draghi, Praet, and Wiedmann turned sort of bearish again. The Euro lost 50 pips, but now it´s back up  to where it was. It completed a round trip pretty quickly and that means that there´s strong buying interest around 1.0630.

There´s one more revelation that this latest Euro roundtrip has uncovered for us. If the economic data from the Eurozone was flawless until now, then today´s dovish comments would have been ignored by the market. But, last week we saw inflation dive back below 1% in Europe. This makes Draghi´s dovish comments look a lot more realistic. 

Nevertheless, the Euro bulls were very quick to jump in after the initial decline this morning. Actually, they have been pretty quick to jump in after every dip. This tells us that the sentiment towards the Euro has changed. Political risks are diminishing and the economy has improved a lot, although there is still a long way to go.

Personally, I have held a bearish view for the Euro and particularly EUR/USD. But now I can´t help but take notice of the better conditions in the EU, which are being reflected by the Euro.

So, should we shift from bearish EUR/USD to bullish? Actually, the USD side is a bit uncertain now with Trump, so if you´re looking to buy the Euro my best bet would be against the GBP. 

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