The European Central Bank has unveiled its long-awaited strategy review, which now sets a target of 2% inflation (symmetrically). The question is how much deviance they are willing to put up with. To put it bluntly, the news has already been baked into the cake, and TD Securities economists believe the EUR will have little influence at this moment. For the time being, they believe the EUR/USD will be dominated by the US dollar ” The Governing Council was expected to adopt a symmetrical inflation target of roughly 2%, and that is exactly what was given, according to the leaks. The biggest source of concern will be the amount of leeway that politicians will grant. The addition of housing prices in the ‘over time’ inflation gauge is cute since it will boost inflation slightly but not enough to push it over the edge.”
“When considered separately, a symmetrical inflation objective is slightly more dovish than their current policy stance. This, on the other hand, does not appear to be a genuine surprise and appears to be baked into the cake. As a result, it may not be sufficiently dovish. All things being equal, we see some room for EUR/USD to correct higher today, but it’s far from a pound-the-table scenario.”
“With the daily RSI already in oversold territory and the EUR/USD hitting support around 1.1780, we’d probably be hoping for a slight comeback regardless, as we’re still expecting the broader ranges to hold.”
“We believe additional support will emerge around 1.1760 and then 1.1735/40 ahead of the figure’s end-of-March lows.”
“If we do get a squeeze today, the 1.1835/50 pivot area looks like it could be an important upside magnet.”/n
