EUR: Modestly higher on dovish ECB, compared to market - Danske Bank

According to analysts from Danske Bank, the euro gained momentum today against G-10 currencies as the dovish market expectations from the European Central Bank were left gravely disappointed.

Key Quotes: 

“EUR rose across the space of G10 currencies today as the dovish market expectations were left gravely disappointed. The lack of clear hints that easing, either in terms of rate cuts or QE, is coming means that the market will find a hard time selling EUR on the expectation of easing unless ECB officials start addressing this in public.”

“After a week where Fed and ECB monetary policy has been in focus the market is now left with a Fed ready to cut rates and an ECB which has only started discussing how it would respond if the economy deteriorated even further. The monetary policy divergence supports our 6M forecast for EUR/USD of 1.15.”

“The direction of Bunds for the coming days will depend on how other risk-markets receive this. The ECB on hold in a situation where the Fed is embarking on easing does not necessarily bode well for risk-appetite and EUR/USD could be pushed higher - adding further downside for eurozone inflation.”