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Euro Price Analysis Talking Points:

  • The Euro[1] has shown resilience in the aftermath of last week’s ECB rate decision. Despite the bank’s dovish tone, the currency continues to exhibit strength against both USD[2] and the Japanese Yen[3].
  • Can Euro sellers come back to make a mark? EURJPY[4] may be better position for such a theme, while a continuation of USD-weakness may continue to help provide bid support behind EURUSD[5].

Euro Strength Through a Series of Risks

It’s been a bizarre if not unexpected two-week stretch for the single currency[6]. Going into the last full week of May, European Parliamentary elections threatened to create a bit of worry[7], and despite a bent of nationalism that showed through many of those electorates, the European currency remained fairly calm in the aftermath. And then last week brought an ECB rate decision in which the bank took on a familiar dovish tone, appearing uneasy with recent trends towards inflation and economic growth. But, similarly, bears failed to capitalize and prices have continued to trend-higher. This speaks to the fact that this pessimism around Europe isn’t necessarily a ‘new’ thing while matters in the US have begun to shift of recent.

Last week saw FOMC[8] Chair Jerome Powell take on a dovish tone in a set of remarks, and this furthered a theme of USD-weakness that outmatched any selling that might’ve shown in the Euro[9]. Those Powell comments also helped to firm US equity prices, and as the risk trade has come back in full bloom

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