EUR/USD gains momentum on Nowotny’s comments on rate hikes

The euro gained momentum against the US dollar near the end of the day following comment from Ewald Nowotny, governor of the Austrian National Bank and a member of the Governing Council of the European Central Bank. He mentioned that a rate hike from the ECB may be on its way and affirmed that rate hikes could be done in a different manner from Fed. 

EUR/USD climbed from near daily lows at 1.0705 to 1.0748, hitting a fresh 1-month high in a few minutes. The pair remains near the 1.0750 area, still below and still within a trading range for the day of less than 45-pips after rising more than a hundred pips yesterday. 

More upside ahead based on fundamentals?

Analysts from Rabobank, pointed out that short-covering is clearly the driving force behind the recent move in EUR/USD, but a significant proportion is attributed to a weakening in the tone of the USD. “The better tone in recent Eurozone economic data, a change in perceptions about the outlook of ECB policy and a reduction in anticipated political risk in the region has also served to strengthen the EUR”, they added. 

According to the analysts the results of the Dutch elections, is likely to calm a few nerves ahead of the French Presidential election. “Based on the assumption that Le Pen loses the run off, we maintain our forecast of EUR/USD at 1.10 by year end.”