Euro Failed To Capitalize On The ECB Meeting

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As Russia-Ukraine high-level talks failed, European equity markets came under renewed selling pressure on Thursday. Earlier in the day, rusk trades bounced after a rally witnessed on Wall Street. But the buying wave was short-lived amid the lack of progress towards resolving the crisis in Ukraine. 

Elsewhere, the euro received a brief boost from the ECB after the central bank left key rates unchanged in its monetary policy meeting, as expected. The bank offered some commitment to end bond purchases in the third quarter this year and highlighted its readiness to revise the schedule again if outlook changes. On the one hand, the ECB offered up itself some flexibility. On the other hand, this brings more uncertainty, which is negative for the euro. 

In a knee-jerk reaction, the common currency briefly jumped to one-week highs around 1.1120 but failed to preserve gains and retreated back into the negative territory. The regulator has also dramatically increased its 2022 inflation forecast and revised the GDP forecast lower, while Lagarde noted that inflation could be considerably higher than forecast. As a result, EURUSD failed to see a sustained bounce and could lose ground further after yesterday’s spike that was triggered by dollar weakness.

Today, the greenback is treading water around the 98.00 figure, struggling for direction as the bulls lick wounds after a sell-off witnessed on Wednesday when traders opted to take profit amid some improvement in risk sentiment. Still, the overall uptrend remains strong and intact as market players will continue to prefer less risky assets amid the geopolitical developments surrounding Ukraine. In turn, EURUSD remains vulnerable to deeper losses despite the recent bounce from the 1.0800 figure earlier in the week.