The Euro did not appreciate following the ECB decision. However, economists at Commerzbank expect to see higher EUR/USD levels.
Why did we not see EUR strength following the ECB decision?
“The market is clearly more concerned about the ECB not being sufficiently sensitised to the risks rapid rate hikes might involve following years of zero and negative interest rates, which make a hard landing of the financial system and the real economy more likely, than it is about the immediate carry a EUR position benefits from today.”
“This concern is not likely to be overcome quickly. However, with every day the market distortions of the past few days are not repeated these concerns are likely to abate a little. As a result, the Euro is unlikely to return to its old strength again soon, but will only appreciate again slowly.”
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