Euro holds at $1.07 as markets digest ECB officials’ remarks

Euro steady above $1.07 as investors look to ECB policymakers for cues

The euro to dollar rate held a notch above the $1.07 mark on Thursday, stepping back from its seven-week peak of $1.0756 achieved on November 6th, as investors processed recent statements from European Central Bank (ECB) officials.

Luis de Guindos, ECB Vice President, highlighted the likelihood of a modest contraction or, at best, stagnation in the eurozone's economy in the fourth quarter, and underscored the ECB's commitment to a data-dependent approach.

On a different note, policymaker Robert Holzmann stressed the importance of remaining vigilant about inflation and remaining ready to raise interest rates when necessary. Market expectations indicate the possibility of the ECB implementing interest rate cuts of around 95 basis points by the end of 2024.

Breaking a streak of 10 consecutive rate hikes, the European Central Bank opted to keep interest rates unchanged at multi-year highs last month.

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Euro forecast: Scotiabank, ING say EURUSD support levels at 1.06

In his euro forecast on Thursday, Shaun Osborne, Chief Currency Strategist at Toronto-based Scotiabank, wrote that the EURUSD pair may see upward momentum if it passes the 1.0710/1.0720 mark:

“EUR drift from Monday’s peak may be steadying. Intraday price action reflects firm support for the EUR on dips to the mid-1.06 area over the past couple of sessions. Trend momentum signals remain bullishly oriented on the intraday and daily studies but intraday trend strength has softened.

Risks remain geared to more EUR strength above while 1.0650/1.0660 support holds. EUR gains should pick up a bit more momentum above 1.0710/1.0720.”

Chris Turner, Head of Global Markets at Dutch bank ING, said markets were not responding to the ECB’s hints of a further rate hike, and identified a similar EURUSD support level to Osborne:

“Investors do not seem to be listening to the threat of one last European Central Bank rate hike, where instead 80bs+ of easing is priced in 2024. We doubt ECB speakers today will move the needle on EUR/USD and the best hope of slightly higher spot prices probably comes from the US weekly claims data.

For today, let's see whether EUR/USD can test decent resistance at 1.0765. Support is set at 1.0650/1.0660.”

Some institutions, however, remain highly bearish on EURUSD. Major Wall Street investment banks J.P. Morgan and Citibank recently forecast the euro to dollar exchange rate to reach parity by the end of the year due to oil-price-driven inflation and a potential economic slowdown triggered by the ECB’s monetary tightening policy.

At the time of writing, the euro to dollar rate was mostly trading sideways around the $1.0714 level, as per MarketWatch data. EUR has shed close to 2.5% of its value against the USD in the past three months.