EUR Rallying on Monday As Stocks Bounce

EUR is pressing higher today as stocks finally start to look a bit more buoyant on the back of the news over the weekend that UBS will purchase Credit Suisse in assistance from SNB guarantees. With central banks around the globe taking extra steps to help bolster liquidity lines for regional lenders, there is a little bit of a spring in the step for risk assets as we head towards the US session on Monday. EUR is benefitting nicely from this backdrop with USD softening following initial strength earlier in the session.

Hawkish ECB Comments

The currency is also being boosted by hawkish ECB comments over the weekend. On the back of the bank raising rates by a further .5% last week, Belgian ECB president Peter Wunsch said over the weekend that the ECB still has a long way to go on rates. These comments echo those made ECB’s Holzmann who also called on the bank to keep going with inflation proving tougher than expected to drive down.

Uncertainty Ahead

While the ECB last week acknowledged that inflation is likely to stay elevated through the target horizon, it also cited increased uncertainty in the outlook linked to banking sector issues. Reaffirming its willingness to act as necessary, the bank reassured markets that it is monitoring the situation carefully. For EUR, while stocks continue to climb, the currency should also continue higher. However, if stocks are knocked lower this week, possibly from a hawkish FOMC shock or fresh, negative banking headlines, EUR will likely head lower accordingly.

Technical Views

EURUSD

The pair is turning higher once again from the latest test of the 1.0515 level support, underpinned by the bull channel lows also. With momentum studies bullish, the focus is on a further push higher and a break of the 1.0785 level targeting a move back up to the 1.11 area next.