Euro hovers near two-month high on positive outlook

Euro rose in European trade against a basket of major rivals, resuming gains and approaching two-month highs after the European Central Bank indicated it’s in no rush to ease policies.

The gains come amid a strong outlook for the EUR/USD pair, as it marches towards $1.1, especially if US data continued to disappoint.

EUR/USD

EUR/USD rose 0.1% to 1.0947, with a session-low at 1.0934, after losing 0.15% on Friday, the first loss in six days on profit-taking away from a two-month high at 1.0981. 

The pair rose 0.9% last week, the third weekly profit in a row and the largest this year as the odds of an ECB rate cut in April declined. 

The ECB

The European Central Bank said last week that current interest rates will help achieve the 2% inflation target if maintained at their current levels for an extended duration.

The ECB said that most main inflation measures have declined, but pressures are still ongoing from local prices. 

ECB President Christine Lagarde said that while consumer prices have clearly slowed down, ECB members are still not confident enough to start easing policies. 

 She asserted the need for more evidence and details in upcoming months.  

European Rates

The ECB is considering the appropriate time to announce an end to policy tightening and the start of interest rate cuts to boost economic performance. 

ECB members remain concerned about rushing into policy easing before inflation has reliably reached the 2% target. 

Thus investors now don’t expect ann ECB interest rate cut until June at the least. 

Positive Outlook

UBS Bank's analysts wrote in a memo that the EUR/USD is maintaining its positive outlook as the dollar index could potentially weaken to 102, in turn boosting the EUR/USD pair to 1.10.