EUR/USD pushes higher to weekly tops on Lagarde

• EUR/USD reverses the initial pessimism and resumes the upside.
• The ECB left the key policy rate unchanged at its meeting.
• Chairwoman Lagarde expects inflation to recede later in 2022.

EUR/USD manages to return to the positive territory and regain upside pressure further north of the 1.1300 hurdle.

EUR/USD firmer on dollar selling, ECB

EUR/USD now advances for the fifth consecutive session following the upbeat tone at the ECB event and while Chair Lagarde’s press conference is under way.

Despite acknowledging current inflation pressures, Lagarde reiterated that consumer prices are seen losing upside traction later this year. She noted that the impact of the pandemic on the economy is fading away at the time when she said that high energy prices continue to hurt the economy and are largely behind the rise in inflation. She said that price pressures are more widespread and elevated inflation lasted more than estimated.

Lagarde noted that risks to the forecast remain mostly balance and the longer-term inflation measures look stable.

Once again, Lagarde reiterated the bank’s data dependent stance as well as its readiness to adapt all tool as needed. She expects the economic activity to remain somewhat depressed in H1 2022.

According to latest news by agency Bloomberg, money markets now see the ECB hiking rates by 10 bps as soon as in June.

What to look for around EUR

EUR/USD reversed the initial knee-jerk and resumed the sharp advance well north of the 1.1300 barrier on Wednesday, recording at the same time fresh weekly/monthly highs. The pair regained the buying pressure following the ECB and Lagarde’s presser, while the broad risk appetite trends also collaborated with the uptrend as well as some speculation of a sooner-than-anticipated ECB interest rate hike (September maybe?).

Key events in the euro area this week: EMU, Germany Final January Services PMI, ECB Meeting (Thursday) – EMU Retail Sales (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.74% at 1.1383 and faces the next up barrier at 1.1397 (weekly high Feb.3) seconded 1.1430 (100-day SMA) and finally 1.1482 (2022 high Jan.14). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).