ECBs Lagarde threw in the towel yesterday saying that getting rates back to 0.0% should be done by the end of the 3Q. There are caveats of course. The economies are still fragile and as Justin points out, the central banks are fighting a fire (inflation) that is being fueled by things outside the control of the respective central banks. That is a problem and as Lagarde say "complicated" as a result of the negative supply shocks.
Lagarde's comments from yesterday are below:
- I expect APP to end very early in Q3
- This would allow a rate hike to take place in July, in line with forward guidance
- If inflation stabilises around 2% in medium-term, a progressive further normalisation towards neutral rate will be appropriate
- But the pace and overall scale of the adjustment cannot be determined ex ante
- Situation currently faced is complicated by presence of negative supply shocks
- There are arguments for for gradualism, optionality and flexibility when adjusting monetary policy
- We have one important guidepost for policy, that is to deliver 2% inflation over medium-term
- ECB will take whatever steps are needed to do so
The EURUSD today has continued the move higher. That rise has the price up for the 6th of 8 trading days since bottoming on May 13 at 1.03485. The price today reached 1.07353 (up 387 pips from the low).
That move higher today took the price above the 61.8% retracement of the move down from the April 21 high at 1.07113.
However the price rise has slowed. The price has been been consolidating over the last 7 or so trading hours between 1.0695 and 1.0735. Of note is the low price stalled near the high price from yesterday at 1.0696.
That 1.0695 area is now a close risk level in the short-term. Stay above would be more positive/bullish, move below and there could be some disappointment from the failed break higher. Traders might look down toward the 1.06421 level on more downside momentum.
On the topside, a break of the high price would have traders looking toward the 1.0757 area. That level corresponds with swing lows from April 14, April 19, and a swing high from April 25. Above that level and the price enters into a up and down consolidation area that peaked at the April 21 high of 1.09356.