Slightly dovish ECB may not have huge impact on EUR

Following ECB's opening statement and the TLTRO decision, markets expected hawkish rhetoric, but the Lagarde conference dispelled these assumptions.

Phrase "several" regarding the number of increases has disappeared from the statement. Lagarde indicated that a few more rate hikes can be expected, although at the same time she admitted that decisions will be made on the basis of data and at least one more rate hike can be expected at the moment.

The ECB notes the huge slowdown in economic activity and emphasizes that this may continue in the future. Here we can find a similarity with yesterday's statements from the Bank of Canada.

The market is pricing-in less hikes in the cycle and points to a peak around 2.7%, not 2.9% / 3.0% as it was yesterday. The yields on German 10-year bonds are falling to around 2%. This is certainly good news for the DE30, but negative for the euro at least at the moment.

Substantial decline in bond yields, i.e. an increase in bund prices (blue line). This provides support for DE30, but a possible turbulent session on Wall Street ahead of us, given the mixed results of the Meta and the upcoming Apple results. Source: xStation5

On the other hand, it seems that the euro does not necessarily weaken due to a slight change in communication on the part of the ECB. Energy prices are falling and lower yields reassure markets that the ECB is coping with inflation, at least in terms of inflation expectations. If the current narrative prevails, EURUSD may resume an upward move.

EURUSD seeks support at parity. From a weekly perspective, the situation looks promising for this pair, one should remember that about 1.5 sessions is still ahead of us. Source: xStation5