On Lagarde’s comments, the EUR/USD surges to weekly highs.

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The EUR/USD has managed to re-enter positive territory and re-establish upside pressure over the 1.1300 level. 

EUR/USD gains on dollar selling, ECB EUR/USD has gained for the sixth straight session, after the encouraging tone at the ECB event and subsequently during Chair Lagarde’s current news conference. 

Despite admitting present inflationary pressures, Lagarde stated that consumer prices are expected to lose their momentum later this year. She emphasised that the economic impact of the epidemic is receding at the same time that she stated that high energy costs continue to harm the economy and are substantially to blame for the spike in inflation. She stated that pricing pressures are more pervasive and that the period of high inflation lasted longer than expected.

Lagarde stated that the risks to the projection are fairly balanced, and longer-term inflation gauges appear steady. 

Lagarde underlined the bank’s reliance on data as well as its willingness to adjust all instruments as required. She anticipates that economic activity would remain fairly subdued in H1 2022. 

According to the most recent report from Bloomberg, money markets now expect the ECB to raise interest rates by 10 basis points as soon as June.

What to look for around EUR

On Wednesday, EUR/USD reversed the early knee-jerk and resumed its rapid climb far north of the 1.1300 barrier, setting new weekly/monthly highs. Following the ECB and Lagarde’s press conference, the pair recovered buying pressure, although broad risk appetite trends also contributed to the upswing, as did some speculation of an earlier-than-anticipated ECB interest rate hike (September perhaps?). 

This week’s key happenings in the eurozone: Final January Services PMI, ECB Meeting (Thursday) – EMU Retail Sales (Friday).

Important difficulties with the back boiler: In the eurozone, there has been an asymmetric economic rebound following the epidemic. The ECB’s stance/potential reaction to the region’s persistently high inflation. Tapering speculation/rate route by the ECB In late January, Italy elects its President of the Republic. France will hold presidential elections in April. The geopolitical implications of the Russia-Ukraine war 

EUR/USD levels to monitor 

So far, spot is up 0.74 percent at 1.1383 and confronts resistance around 1.1397 (weekly high Feb.3), 1.1430 (100-day SMA), and eventually 1.1482. (2022 high Jan.14). A break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) on the way to 1.1000. (psychological level).

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