Monetary policy divergence is still a valid argument for weaker EUR/USD - Rabobank

Piotr Matys, FX Strategist at Rabobank, suggests that while EUR/USD maintained upside momentum and appreciated beyond the 1.13 level, the potential increased monetary policy divergence between the ECB and the Feb is still a valid argument in favour of a weaker EUR/USD. 


“After all, the former remains fully committed to provide substantial stimulus for an extended period of time (Bloomberg reported this morning that ECB Peter Praet said that the ECB could still cut rates if needed) and the latter may raise rates in the coming months. That said, the odds for a hike in April have dropped to just 4% from 25.1% before the Fed revealed its dovish dot-plot, which implies only two hikes this year. The implied probability of a hike in June fell to 38.6% from 53.6% earlier this week, according to Bloomberg.”

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