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EUR – Euro

ECB and Fed meetings joint effect on the euro

ECB, Fed, Meetings, Joint Effect, Euro, Currency Analysis, fx trader, forex

The March ECB and Fed meetings generated a supportive joint effect on the euro (from EUR/USD 1.05 to 1.07), in contrast to the opposite effect reaped by the corresponding meetings in December, which had triggered a downward reaction (from EUR/USD 1.08 to 1.03). In that case, however, the ECB had announced the extension of its purchase programme, whereas the Fed had simultaneously hiked rates, indicating that three further rate increases were to come in 2017.

At its meeting of 9 March, on the other hand, the ECB remarked that “the risks surrounding the euro area growth outlook have become less pronounced”, implicitly showing openness to the possibility of the close of 2017 marking a monetary policy reversal. This means that – if the picture does not worsen back – the euro should start recovering, albeit at a slow and gradual pace. Less than a week later, at the FOMC meeting of 15 March, the Fed hiked rates as expected, but kept unchanged the forecast path of subsequent hikes, confirming the scenario outlined in December, limited to three hikes in total this year. This will compress the dollar’s upside margin in general, aiding a strengthening of the euro, in particular if the assumed ECB reversal effectively takes place.

 

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