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Euro Rally Pauses As ECB Maintains Interest Rates Unchanged

The ECB held its key interest rate at 0.00% at today’s meeting, as was expected. The central bank reduced purchases under the Asset Purchase Program (APP), which had been set at EUR 40 billion for the second quarter. Instead, the ECB will purchase EUR 40 billion in April, 30 billion in May and 20 billion in June. The APP purchases are scheduled to end in the third quarter, after which the ECB will be in a position to raise interest rates.

The financial markets continue to be rocked by extreme volatility, and this has been the case with the euro, which soared 1.67% on Wednesday. The euro is risk-sensitive, especially towards the Ukraine crisis, which is in proximity to the eurozone. Risk appetite improved on Wednesday, as oil prices retreated and some Ukrainian civilians managed to utilize human corridors and get away from the fighting. The dollar was down broadly, although traders would be wise to keep in mind that we are only a (negative) headline away from risk sentiment evaporating and sending the safe-haven dollar to higher ground.

On the Ukraine front, a meeting between the foreign ministers of Russia and Ukraine earlier today did not result in any breakthroughs, although the sides agreed to continue to meet. The fighting continues, and with the Russian invasion force appearing to have stalled, there are fears that Russian President Putin could barrel down in frustration and hit more civilian targets. This would exacerbate the massive humanitarian crisis, which has displaced millions of Ukrainians.

EUR/USD Technical

  • EUR/USD continues to put pressure on resistance at 1.1053. Above, there is resistance at 1.1156
  • There is support at 1.0886 and 1.0796
EUR/USD Daily Chart
EUR/USD Daily Chart

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