Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

4 Reasons Why Euro Tanked On ECB

By Kathy LienForexApr 22, 2021 06:01PM ET
www.investing.com/analysis/4-reasons-why-euro-tanked-on-ecb-200574766
4 Reasons Why Euro Tanked On ECB
By Kathy Lien   |  Apr 22, 2021 06:01PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The euro traded sharply lower against the U.S. dollar after the European Central Bank’s monetary policy announcement. On a technical basis, EUR/USD rejected the 100-day SMA, an important inflection point for the currency. By failing to break above this key measure for the past four days, the risk is for a deeper slide to 1.19. On a fundamental basis, no changes were expected from the ECB and none were made, but it is clear the central bank disappointed.

In light of the ongoing U.S. recovery and the Bank of Canada’s tapering, investors were hoping for more. Instead, ECB President Christine Lagarde emphasized concerns about the near-term outlook, indicated that the ECB is not the BoC, and provided little insight on what comes next. Unlike the Eurozone, Canada can provide strong fiscal stimulus, whereas countries in Europe struggle to coordinate any type of fiscal response. Canada also benefits more quickly from the U.S. recovery.

With seven weeks until the next policy meeting, the central bank opted to bide its time and keep the market guessing. June is a very important meeting because the ECB will update its economic projections and, with such a big gap of time, it did not want to pre-commit to changes before it is clear that progress is being made. There are reports that Germany’s vaccine priority list could be lifted by May, which means vaccinations would be available to everyone. If this comes to fruition and countries like France, Spain and Italy offer vaccinations for anyone who wants them before the next ECB meeting in June, then the outlook becomes much clearer. By then restrictions should ease and economic activity should begin to normalize, allowing the central bank to start talking about tapering asset purchases.

Demand for U.S. dollars also contributed to the move as jobless claims fell to fresh pandemic lows and the greenback traded broadly higher. Existing home sales tumbled unexpectedly, but that was not a complete surprise given the rise in mortgage rates.

In summary, here are the four reasons why EUR/USD tanked on ECB:

1. Near term, the ECB still sees outlook clouded by uncertainty
2. The ECB reaffirmed accommodative policy
3. The ECB failed to provide guidance on what comes next, made no mention of plans for PEPP changes
4. Fresh pandemic lows for U.S. jobless claims

Looking ahead, the U.S. dollar could remain in demand, keeping EUR/USD under pressure ahead of next Wednesday’s Federal Reserve monetary policy announcement. With stocks hovering near record highs and the recovery gaining momentum, the central bank should be more confident and optimistic. However, we have one more piece of important Eurozone data before the week comes to an end that could trigger big moves in EUR/USD – the April PMI reports. Widespread restrictions and Lagarde’s cautiousness suggests downside risks that would be consistent with the recent decline in German investor confidence (ZEW). With EUR/USD falling already, weak PMIs should send the pair tumbling below 1.20.

Sterling is also in focus on Friday, with UK retail sales and PMI reports scheduled for release. Unlike the Eurozone, firmer data is expected all around as the country continues to recover. While sterling extended its slide against the greenback for the third consecutive trading day and underperformed EUR, on a fundamental basis the outlook is bright.

4 Reasons Why Euro Tanked On ECB
 

Related Articles

Al Brooks
EUR/USD In 3-Day Pullback By Al Brooks - May 14, 2021 3

EUR/USD Forex market trading strategies o    Three-day pullback from double bottom bull flag (April 22 and May 5) o    Double bottom pullback buy signal triggered today when today...

4 Reasons Why Euro Tanked On ECB

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Boner Uncle
Boner Uncle Apr 22, 2021 11:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
dollar will always be king!!
Richard Arguile
Richard Arguile Apr 22, 2021 9:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Existing home sales fell because of low inventory of homes on the narket. I doubt if the current mortgage eates were a factor.
Walter Clayton
Pipchop Apr 22, 2021 5:34PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Insightful and clear KL and I do appreciate your views.
Lukman Ademola
Lukman Ademola Apr 22, 2021 4:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yoosef Ahmadi
Yoosef Ahmadi Apr 22, 2021 4:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you. Great news 🙏🙏🙏🙏🙏
Kevin McCarthy
Kevin McCarthy Apr 22, 2021 2:48PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
looked to me like people were dumping the Euro for the Dollar to buy up bonds. Someone took advantage and dumped the garbage US bonds in the buying pressure.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email