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EUR/USD in consolidation mode – Westpac

The euro was quite stable last week, showing no ill effects from Madrid’s tough measures on Catalonia – indeed Monday saw a sharp rally in Spanish stocks and bonds, but of course EUR/USD consolidation last week follows the steep decline in the wake of the ECB meeting (as much as -2%), according to Sean Callow, Research Analyst at Westpac.

Key Quotes

“The ECB’s plan to reduce the pace of bond purchases from €60bn to €30bn from Jan 2018 and maintain this “until the end of September 2018, or beyond, if necessary” seems to have been a slightly looser plan than some had expected.” 

“But it is surely defensible given Eurozone inflation’s remaining distance from the policy target of “below, but close to, 2%” – see chart. EUR/USD kicked off a 5+ cent rally from 1.1500 at the 20 July ECB meeting where the impression was that asset purchases would be not still be as high as €30bn by Sep 2018. Whether the euro can complete its unwind of this rally in the month ahead probably depends more on the US dollar mood.”

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