EUR/USD – neutral bias – (1.3700-1.4000)
The euro continues to trade close to recent highs against the US dollar. The ECB’s attempts to talk down the euro through signalling that euro strength is increasing the likelihood of further monetary easing is having only a limited negative impact upon the euro in the near-term.
The lack of reaction in part highlights that the time for talking is now over and the ECB needs to implement credible policy action to materially lower the euro and reduce downside risks to inflation.
The market also remains sceptical over both the ECB’s desire and ability to implement effective monetary easing including measures like some form of QE. Heightened geopolitical risks linked to developments in the Ukraine may also be encouraging euro supportive inflows in the near-term. A speech by ECB President Draghi and the release of the preliminary euro-zone PMI surveys for April will be in focus in the week ahead.