The ECB President reiterated that the regional inflation outlook remains low in the medium term, so that a rate hike next year is unlikely.
EUR/USD fell to more than 16 month lows after breaking the key 1.14 support.
The weakness is expected to continue amid the dovish ECB stance.
At the time of this news release, the EUR/USD pair was moving in the range of 1.1378.
In her statement at the European Parliament Committee on Economic and Monetary Affairs, ECB President Christine Lagarde emphasized that the central bank expects the outlook for inflation in the European region to remain below the target in the medium term.
He also stressed that it is highly unlikely for his party to think about a rate hike in 2022.
"The (current) fragile purchasing power should be suppressed by higher energy and fuel bills, so monetary tightening should not be imminent as the region's economy is far from recovering strongly," Lagarde said.
The dovish statement came after the Netherlands and Austria re-imposed partial restrictions to curb the spike in COVID-19 cases.
In fact, Germany, which is the largest economy in Europe, is also reportedly planning to impose national restrictions on people who have not been vaccinated.
This news is of course a negative catalyst that has the potential to hamper regional economic recovery.
Euro is believed to weaken further
Some market analysts argue that a new wave of restrictions in Europe will further pressure the position of the Euro against the US Dollar.
“Last week, EUR/USD broke the 1.5000 psychological support and we think there is currently room for the euro to break below 1.1300 in late November,” an ING analyst said in a note.
Amid expectations of a further decline in the Euro, the latest data suggest that market participants are betting there will be some respite for the Euro to trim losses and consolidate against the US Dollar.
However, the currency's position remains fragile due to the differences in monetary policy between the Fed and the ECB.
In this regard, the tapering program and expectations of a Fed rate hike are expected to push EUR/USD down further over the coming months.
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