EUR/USD to dive below 1.10 on contrasting monetary policy path with the US – ANZ

In the view of analysts at ANZ Bank, the European Central Bank decision will stand in stark contrast to the Federal Reserve where there now seems more political pressure to rein in super-loose monetary policy. Subsequently, the EUR/USD pair could slip below the 1.10 level.

Euro weakness to extend further if more stringent social distancing measures are imposed

“For the euro, the contrasting monetary policy path with the US, where the Fed is actively creating space to raise rates soon if needed, is stark. The diverging assessments of US and EA inflation paths and policy rate expectations can continue to keep the USD strong in the near-term.”

“Euro weakness could extend further if the wave of COVID-19 infections across the EU forces more stringent social distancing measures while an exacerbation of gas shortages could add to economic disruption.”

“A test in EUR/USD of 1.10 or below cannot be ruled out.”