- The market is concerned about ECB´s independence.
- Broad recovery in the dollar is hurting EUR.
EUR/USD closed the European session around 1.2407, almost unchanged (+0.02%) after the ECB got a new Vice President on consensus nomination in the form of De Guindos, the current Spanish economy/finance minister.
As par De Guindos- “Steps need to be taken to deepen economic and monetary union and having been a government minister does not limit the independence of the ECB. Independence of ECB guaranteed by its mandate. He is neither a hawk nor a dove, but a pragmatic person”.
The market is assuming that De Guindos appointment has cleared the way for a German ECB´s president next year, when Draghi’s term will end and in that scenario, Weidmann, the current BUBA chief, may be the next president, who is known as a hawk, but now increasingly positioning himself as an owl (centrist) for the vital post.
For the EUR, there were no important economic data on Monday, but the current account for December flashed subdued at 29.9B against an estimate of 30.5B (prior: 35.0B). Basically, EUR weakness on Monday was a function of dollar recovery after Japanese government said that it is watching Yen move with “greater” sense of concern and is ready to act when actually needed.
Also, overall US economic data was positive for the USD on Friday along with US DOJ (Department of Justice) indictment report for the alleged Russian disinformation campaign.
Earlier, EUR came under some pressure after reports that Ireland has withdrawn its candidacy for ECB´s vice president and will support the Finance Minister (FM) of Spain as a “consensus” candidate. Incidentally, FM of Spain is not an economist and thus the market is concerned that likely appointment of a non-economist political figure may tarnish the image of ECB’s independence.
There is a strong buzz on the street that appointment of someone from Southern Europe like Spain could be strategic as someone from Germany is poised to take Draghi’s role next year.
Apart from politics regarding ECB’s VP post, EUR is also under pressure on news that Latvian central bank Governor Rimsevics, a member of the ECB’s governing council, was detained by the anti-graft bureau in a flurry of actions by officials, but later he was released on bail.
Overall, EZ economy is firing all the cylinders and performing well. Thus it now seems that ECB is not concerned about the strength of the currency and an eventual policy normalization. Over the last few months, ECB is increasingly shifting its focus from QE tapering to rate hikes.
Technically, EURUSD now needs to stay above 1.2350 area; otherwise, 1.2213-1.2200 and 1.2191-1.2052 may be visible soon. For any bounce back EURUSD has to sustain above the 1.2495-1.2560 zone towards 1.2595-1.2625 and the 1.2762-1.2881 area in the coming days.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.