Euro Racks up Gains Against Dollar as ECB Liffoff Expectations Gather Pace

Euro Racks up Gains Against Dollar as ECB Liffoff Expectations Gather Pace

market outlook

EUR/USD is trading down 0.02% at 1.0579        

The euro surged against the dollar Thursday as the release of the account of the European Central Bank’s April meeting showed concern over inflation had tipped dovish members of the central bank into supporting a quarter percentage point rate hike as soon as July.

“Net asset purchases should be ended as soon as possible, opening the possibility for a first interest rate hike shortly after,” the accounts of the ECB’s April 14 meeting showed on Thursday. “The view was expressed that the criteria for interest rate hikes were already clearly met.”

The ECB in April decided to defer its decision on whether to end asset purchases in June, preferring to wait for incoming economic data, particularly on inflation. But incoming data since then has sparked some concern among dovish ECB members that inflation, particularly wage inflation, could become entrenched if not addressed through policy tightening.

“Since then [the April] meeting quite a few of the more dovish ECB Council members have apparently changed their mind,” Commerzbank said. “In recent days, these members have signaled their support for a first-rate hike in July, after having decided to stop net asset purchases at the June meeting.”

The backdrop of growing expectations for the ECB to shift to a more hawkish stance on monetary policy sets a high bar for a hawkish surprise that could see the euro lose steam against the dollar.

On technical fronts EUR/USD RSI stood at 54.00 and currently it is trading above all MA. So, BUY position can be taken with following target and stoploss:

TRADE SIGNAL – : EUR/USD – BUY: 1.0578, TARGET: 1.0602, STOP LOSS : 1.0553

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