The Euro is looking up. Overview for 24.05.2022

EURUSD is keeping its positive momentum but experiencing slight corrections now and then.

The major currency pair continues moving upwards. The current quote for the instrument is 1.0711.

There were no important macroeconomic statistics early this week and investors were mostly focused on technical aspects. In the pause between two important meetings of the US Fed, May and June, the interest in the “greenback” went down a little bit, thus helping other traded currencies to recover.  

At the beginning of the week, ECB Governor Christine Lagarde said that the negative interest rate might be cancelled by the end of the third quarter. It means that the APP programme will be terminated in the summer. After that, the European regulator will be ready to raise the rate during its July meeting just as expected.

The ECB’s major focus will still be on inflation and how to stabilise it at 2% in the mid-term. As soon as the target is reached, the regulator will switch to smoothing its monetary policy and moving towards the neutral rate value. At the moment, it’s rather difficult to predict by how much and how fast. 

The regulator has strong arguments in favour of being flexible and “sluggish” when making monetary decisions. Lagarde said the ECB was doing its utmost to help the CPI reach stability at 2%.

Well, it’s the most “hawkish” stance the ECB can afford right now. Considering that consumer spending will reduce under the pressure of the CPI boost, the regulator will face some resistance from the population not liking loan pricing increase – it’s inevitable. At the same time, too aggressive strategy is also not good – outlining the prospects of the July rate hike and expressing the readiness to move away from negative rates in the third quarter, Lagarde, in fact, closed the door to a 50-point rate hike in the nearest future.