Danske Bank Research comments on EUR/USD reaction to today’s ECB September policy statement.

“The FX market bought the pair on ECB’s more positive assessment of economic growth this year and the signals that an announcement on monetary policy awaits in October. However, at the press conference Draghi made an effort to cap a further rise in EUR/USD by stressing the negative impact on the medium-term outlook for inflation from the stronger euro.

Hence, while the price action today underscores our view that underlying euro momentum remains strong, the market will keep in mind that the ECB is unlikely to tolerate a further strong euro appreciation in the short term, which should put a soft cap on the pair ahead of the October meeting.

We maintain our view that any dip should be shallow and short-lived,” Danske argues. 

Source: Danske Bank Research