The Euro has fallen over 200 pips from highs helped lower by a Reuters report suggesting ECB officials were unhappy with the strength of the single currency.
The ECB is due to meet next week in a highly anticipated meeting which could set the path of QE tapering. Today’s report implies there is a preference for a slower shallower reduction in bond purchases than the market has been pricing in.
The dollar has also strengthen after weeks of decline helping to push EUR/USD back from multi-month highs.
Some analysts think that we have already seen a short-term top and EUR/USD is likely to drift lower.
“We expect several more rate hikes by the Fed this year and the next. A softer message from the European Central Bank (ECB) aimed at avoiding further euro strength is not that unlikely at the next meeting. We think this has the chance to re-establish relative monetary policy expectations as the dominant driver of EUR/USD and support the dollar in the coming months, especially considering the potential for a reversal of current positioning among speculative accounts,” said Richard Falkenhäll, Senior FX Srategist at SEB who has a year end target of 1.14.