EUR/USD trades range bound, in a tight range after breaking below the August low at 1.1696,
EUR/USD could consolidate further as the European Central Bank (ECB) showed no signs of looking to adjust monetary policy.
EUR/USD Range Bound Despite Dovish ECB
EUR/USD trades near $1.1610 the monthly low as ECB President Christine Lagarde confirmed the central bank’s cautious stance saying that the central bank “continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.”
President Lagarde indicated that the ECB will remain accommodative after expanding the Pandemic Emergency Purchase Programme (PEPP) to EUR 1.35 trillion in June amid uncertainties ahead. Christine Lagarde said that the ECB “will carefully assess all incoming information, including developments in the exchange rate, with regard to its implications for the medium-term inflation outlook,”
The central bank is expected to hold steady at its next meeting on October 29 as the central bank considers that its measures are supportive of price stability. The ECB is unlikely to step in on the FX market given Vice-President Luis de Guindos remarks that “it would be suicidal to enter into any sort of dispute about exchange rates.”
Investor confidence could drive EUR/USD ahead of the ECB meeting as the pullback in EUR/USD from the yearly high (1.2011) is roughly in line with the weakness in global equity markets. Retail traders have been net-short the pair since mid-May and this could continue into the next month
