ECB: A cautious Draghi fails to the contain the EUR - ING

Petr Krpata, Research Analyst at ING notes that with ECB tapering clearly coming, a cautious Draghi was not enough to tame EUR/USD upside.

Key Quotes

“We look for the EUR/$ 1.1714 level to be tested in 3Q, especially as ECB officials can do little about a politically-plagued USD. Yet, a sustainable break above 1.2000 is unlikely given President Draghi’s comments in regards to an unwanted tightening of EZ financial conditions.”

“The ECB chief’s comments were cautious enough to keep the upside in bund yields limited, creating a supportive backdrop for EM FX. As long as the probability of an imminent taper tantrum bund sell-off is kept at bay, while EUR/USD continues nudging higher (via the expectations channel, rather than actual bund move), CEE FX will remain in the sweet-spot and should continue outperforming EM FX.”