Euro dives after Lagarde speech

The Euro (EUR) could not sustain the earlier bull run to the 1.1150 region against the US Dollar (USD) and forces EUR/USD to come all the way down to the area below the psychological 1.1000 mark, or 2-week lows, following the ECB event on Thursday.

The earlier strong advance in the pair comes on the back of extra weakness in the Greenback, which was particularly magnified after the FOMC event on Wednesday. On this, the Federal Reserve unanimously hiked rates by 25 bps as widely expected, taking the Fed Funds Target Range (FFTR) to 5.25%-5.50%.

In addition, at his press conference, Chair Jerome Powell confirmed live meetings for policy statements, citing little change from May and June iterations, while the current level of interest rates support slower tightening if needed.

The pair saw its early uptick trimmed after the European Central Bank (ECB) raised its policy rates by 25 bps. From the bank's statement, interest rate decisions will be based on inflation outlook, economic and financial data, underlying inflation dynamics, and monetary policy transmission. In addition, the Council will set restrictive interest rates to achieve a 2% medium-term target, ensuring a timely return of inflation to the target. The data-dependent approach will continue to guide future decisions.

At her press conference, President Christine Lagarde stated that they were maintaining an open-minded stance regarding September and the coming months. She also mentioned that the Council were not engaging in forward guidance and that they had the option of either increasing or maintaining interest rates. Furthermore, they had not yet deliberated on implementing any balance sheet reductions. Lagarde expressed that they were beginning to observe a robust transmission of policies into the economy and that there would be no compromise between interest rates and quantitative tightening.

In the domestic data space, Germany’s Consumer Confidence gauged by GfK rose to -24.4 for the month of August, while the Unemployment Rate in Spain dropped to 11.6% and Consumer Confidence in Italy eased to 106.7 in July.

Across the pond, advanced Q2 GDP figures saw the economy expand 2.4% YoY. Additionally, usual Initial Claims rose by 221K in the week to July 22, Durable Goods Orders rose sharply by 4.7% MoM in June, Pending Home Sales contracted 15.6% in the year to June, and preliminary Goods Trade Balance figures now expect a $87.84B deficit in June.