EUR/USD: Recent shifts in ECB and Fed rhetoric are bearish for the euro – MUFG

FXStreet reports that economists at MUFG Bank discuss EUR/USD prospects.

“ECB Executive Board member Fabio Panetta reinforced the dovish shift in rhetoric yesterday when he stated that ‘only a sustained increase in inflationary pressures, reflected in an upward trend in underlying inflation and bringing inflation and inflation expectations in line with our aim, could justify a reduction in our purchases… But this was is not what we projected in March. We no longer expect the ECB to explicitly commit to a slower pace of QE purchases at the June meeting despite the improving growth outlook and still loose financial conditions in the euro-zone.”

“Recent comments from Fed officials have signalled that they are moving closer to talking about tapering QE potentially as soon as at their upcoming policy meetings.” 

“The recent dovish shift in ECB policy rhetoric and contrasting hawkish shift in Fed rhetoric is a bearish development for the euro. So far it is helping dampen EUR/USD’s upward momentum at just above the 1.2200-level, but remains to be seen whether it will be sufficient to trigger a correction lower in the coming months.”