EUR Under Pressure After Dovish ECB Meeting

  • 7
    May, 2020

    EUR Under Pressure After Dovish ECB Meeting

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    The EUR has been under pressure for the past few days due to overall bearish sentiment. The EUR faces even more struggle now as a statement made by the German Constitutional Court gave a warning that some of the measures done by the European Central Bank does not have the backing of the EU Treaty. Due to this, the EUR may face some problems following the ECB meeting.


    Aftermath of the ECB Meeting

    Amid the ECB meeting, the ECB has to justify their Public Sector Purchase Programme in three months. This situation further pushed the EUR further down as confidence in the currency dwindled. According to ECB President Christine Lagarde, the government plans to ensure that the inflation levels will stay within consistent with their medium term goals.

    That said, a dovish forward guidance may be applied on the next meeting on June 4. This may possibly result in a GDP drop of 5% in the month and an overall drop of 12% in the entire year.


    Volatility of the EUR May Follow

    Due to the circumstances, the ECB continues to hesitate in pushing for the main refinance rate. At the same time, the Governing Council still continues increasing the size of the Pandemic Emergency Purchase Programme.

    With that, ECB Vice President Luis de Guindos may most likely have a dovish sentiment when he shows the ECB Annual Report to the Committee on Economic and Monetary Affairs of the European Parliament.


    Effect on the EURUSD

    With the EUR already facing bearish pressure, the upcoming NFP data release from the US may further push the USD higher and the EUR lower. This will depend on the results of the US data release.

    Moving forward, it is quite likely that the EURUSD may form lower lows in the days to come with a more bearish sentiment at hand.




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