EUR: Confined in a range ahead of ECB - BBH

Research Team at TDS, notes that the euro reached $1.1385 yesterday, a four-day high, but euro has hardly backed off and has been confined to about a quarter cent range today.

Key Quotes

“The market may be cautious ahead of tomorrow's ECB meeting.

Recall at the March meeting; the euro was falling as Draghi announced several measures meant to provide additional monetary support. However, the euro reversed course and rallied as Draghi suggested there was no more room to cut rates. Subsequently, he and other ECB members tried walking back from the claim, but to little avail.

Mersch's recent comment noting that the ECB does not have a target for the euro was politically correct, but not particular helpful for offsetting the tightening of financial conditions represented by the euro's appreciation. There is some risk that at the press conference tomorrow following the ECB meeting, Draghi may be more forceful in resisting premature tightening.”