EUR/USD: 1.01 should offer interim resistance – TDS

The European Central Bank (ECB) raised its key interest rates by 75 bps, leaving the Depo Rate at 0.75%. In the view of economists at TD Securities, the decision does not inspire much confidence in the euro.

The outlook for EUR/USD remains to the downside

“At a minimum, neither Lagarde's press conference or the 75 bps hike is enough to inspire much confidence in the euro.”

“The move to positive rates will certainly have some impact on diversification of portfolio flows into EU denominated assets, but it will need to be more than enough to offset worsening trade flows to be euro supportive. Economic and political stability will be necessary as well. Right now at this point in time, the EU has neither.” 

“EUR upside is a very difficult argument to make with the US in a far stronger position with greater energy security than the Europeans who hitched their wagon to Russia for its energy needs.”

“Near-term, we would look for some consolidation in EURUSD ahead of US CPI next week. But we see clear lines in the sand with 1.01 as a fade point if we get there. EUR/USD downside remains its most likely path forward.”