- EUR/USD plunged 50 pips below 1.21in Asia Pacific trade.
- Dovish ECB commentary & USD strength in risk-off trade ahead of the FOMC meeting has weighed on the pair.
- Dovish ECB comments and upbeat demand for the US dollar in risk off trade ahead of Wednesday’s FOMC meeting has weighed on EUR/USD.
The pair dropped below 1.2100 and now trades -0.7% at 1.2075, after recovering from 1.2050.
Dovish ECB drives euro lower
ECB Governing Council Member Klaas Knot, typically a more hawkish policy maker made dovish remarks, hinting that the ECB could cut interest rates to prevent any further strengthening of the EUR.
Furthermore, citing ECB sources Bloomberg reported that ECB officials believe that markets are underpricing the odds of an interest rate cut. The EUR has been under pressure as interest rate expectations are repriced.
Risk-off flows into the US dollar add to the pressure on EUR/USD. Interestingly despite all the dovish ECB talk, EUR/USD is actually not even the worst-performing USD major.