Why the euro suddenly rallied? – Westpac

Richard Franulovich, analyst at Westpac explained that while Draghi noted that the ECB could still deliver more stimulus via other means, the damage was done as the underlying narrative shifted to the limits of negative rates/policy easing.

Key Quotes:

“One can’t help but think this remark may not have been a “gaffe”. It may have been deliberate and the quid pro quo from the hawkish wing of the Governing Council for today’s large easing package.

There is an argument that the market reaction could be more about a genuine belief that today’s policy measures will finally help lift Eurozone growth and inflation expectations. Four new TLTROs and buying corporate bonds certainly hone-in very directly on the real economy and the credit channel, and against that backdrop EUR strength may well be a sensible reaction. We don’t completely buy it.

A thicket of support levels for EUR between 1.0710-1.0825 was always going to slow EUR’s downmove and now that it has rallied aggressively off the top of this support zone its technical posture looks quite bullish. EUR might dig into 1.13 in coming days.”

Richard Franulovich, analyst at Westpac explained that while Draghi noted that the ECB could still deliver more stimulus via other means, the damage was done as the underlying narrative shifted to the limits of negative rates/policy easing.

(Market News Provided by FXstreet)