Summary:

• Constancio speaks about keeping “sufficient” monetary policy accomodation
• Euro little changed on the day after recent rises 
• EURUSD back at pre-ECB levels

Speaking in Frankfurt Vitor Constancio, the vice-president of the ECB, has made several comments on monetary policy with the overall feeling being somewhat dovish. Selected comments are as follows:

• By keeping a sufficient degree of monetary policy accommodation we can be confident that our goal will eventually be reached in accordance with our mandate
• Negative policy rates have been an effective tool in the Euro area
• We have every reason to believe that the lower bound is still below current rates 

The comments have seen little immediate impact in the markets with the Euro fairly mixed on the day. The single currency has enjoyed a strong run higher of late and is showing gains against most of its peers over the past week apart from CAD, GBP and NZD – with these three all showing gains due to their own domestic factors. 

 The Euro has risen against most of its peers in the past week. Source: xStation

The EURUSD is the most widely traded cross in all of FX and the pair has now completed a round trip from the ECB meeting last week. The EURUSD rallied sharply not long after Draghi began speaking, with an apparent lack of overt dovish comments the catalyst for the rise. The subsequent pullback is in fact more due to a resurgence in the USD than a falling back of the Euro. 

 The EURUSD has now handed back all of the post ECB gains. Source: xStation

Longer term, the EURUSD remains in a clear uptrend since the 1st round of the French elections as defined by the 8 and 21 period EMAS. These have remained in a bullish orientation (8 above 21) since April and until there’s a bearish cross between these then the trend remains firmly higher.

 The market remains in an uptrend and until price falls below the 21 EMA there could be further gains ahead. Source: xStation