July 23, 2021

What Has the ECB Done to the Euro?

 Heading into weekend trading, the US dollar traded slightly lower against its major rivals, while the euro rebounded after plunging amid disappointment over the European Central Bank (ECB) statement.

At the ECB policy meeting yesterday, the central bank confirmed that they were in no hurry to raise interest rates. Unlike other central banks, the ECB not only refused to talk about tapering, but they also changed their guidelines to allow for higher inflation.

Although President Christine Lagarde said there was hope for strong growth in the European Zone economy in the third quarter, the outlook for inflation was weakening and the Delta virus variant was the cause of growing uncertainty.

The euro traded steady around $ 1.1777 against the greenback dollar, after going through a previous volatile trading session that had seen the currency soar to $ 1.1829 before plunging back to $ 1.1757 as soon as the ECB policy decision was announced.

Meanwhile, the US dollar traded back gloomily after gaining gains in the previous session. During the Asian session, the dollar index traded around 92.79 against a basket of major currencies.

The pound traded higher at the 1.37700 price level against the US dollar, with market focus now focused on the publication of UK and European Zone manufacturing and services PMI data today.

In addition, commodity -linked currencies also traded steady after benefiting from the weakness of the US dollar, with limited movement due to concerns over the coronavirus threat still plaguing the market.