Will the euro keep on climbing? – Commerzbank

By FXStreet Despite more expansionary ECB policies, the euro has appreciated considerably. As far as moves against the US dollar are concerned, this is partly due to markets having lost faith in a tightening of US monetary policy. What is more, the ECB has ceased to talk the euro down. Nonetheless, we continue to reckon with a weaker euro in the medium-term.

Key Quotes

“Since December, EUR-USD has strengthened significantly from levels of around 1.06 to rates around 1.14. Besides a hesitant Fed, the signals recently sent out by ECB president Mario Draghi have also played a role. How long this euro strength will continue depends largely on the US central bank. Were it to soon follow up its December interest rate move with further steps, the exchange rate would likely fall again. Moreover, the ECB will probably also react to a euro that it believes to be too strong, and other EUR-positive factors at present such as low inflation expectations should also lose potency.”

“For a long time, many observers bet on pronounced EUR-USD weakness amid the “divergence of monetary policies”. Rising interest rates in the US and an increasingly expansionary monetary policy in Europe were conditions which many people thought was an …read more

Source:: FX Street