EUR/USD has largely stabilized around the 1.08 mark following this week's rally, driven by the seismic shift in fiscal spending in the euro area, Danske Bank's FX analyst Kirstine Kundby-Nielsen reports.
"As expected, the ECB meeting had a limited impact after the widely anticipated 25bp rate cut. The central bank maintained a meeting-by-meeting approach with no pre-commitment to a specific rate path. However, a shift in the ECB's statement, describing policy as now 'meaningfully less restrictive,' signalled that the current rate level is closer to the terminal rate, initially providing a slight boost to EUR/USD."
"Today, the focus shifts to the US NFP report for February. We expect a print of 120k, below the market consensus of 160k - a downside surprise that, if realized, could put downward pressure on US yields and the broad USD. Overall, we see further upside potential for EUR/USD on a tactical basis."
"While EUR optimism from increased fiscal spending may now be largely priced in, potential catalysts such as a ceasefire deal in Ukraine or a further deterioration in the US cyclical macro outlook - especially the latter - could drive additional gains in the pair over the next 1-3M."
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