Euro Preserves Momentum amid ECB Speculations

The euro continued to trim losses during the current trading session even though German inflation was disappointing. The reason for the currency’s good performance were speculations about the possible change of European Central Bank’s dovish stance.

The German Consumer Price Index fell 0.2% in April, more than analysts predicted (0.1%). Yet that did not disturb the euro, which was rising on the report from Reuters that the ECB may change its forward guidance to a less dovish one at the next week’s policy meeting, closing door to prospects of additional stimulus. An unnamed source from the Governing Board said:

After the French election the political risk is clearly down and economic indicators are by and large positive, so it’s time to acknowledge this.

But that change is in no way guaranteed as another anonymous source stated:

The positive environment has been relatively short compared to the long periods of crises we had. It wouldn’t be responsible to base a major policy shift on such a short upswing.

Indeed, just yesterday ECB President Mario Draghi was talking in defense of monetary stimulus.

EUR/USD rose from 1.1162 to 1.1179 as of 15:15 GMT today after falling to 1.1109 intraday. EUR/GBP was down a bit from 0.8694 to 0.8689 but far above the daily low of 0.8655. EUR/JPY traded at 124.01 after opening at 124.20 and falling to the daily low of 123.15.

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