- EUR/USD has displayed a modest rebound to near 1.0820 after the carnage.
- The ECB kept its interest rate unchanged and provided dovish guidance.
- The US Treasury yields rebounded on advancing bets over a tight Fed policy.
The EUR/USD pair has witnessed a short-lived pullback after printing a fresh yearly low at 1.0757 on Thursday. An intense sell-off in the shared currency came after the European Central Bank (ECB) announced an unchanged interest rate policy, well in line with the market expectations.
Technically, the maintenance of a status quo by the ECB President Christine Lagarde was already in the expectation category, therefore dovish guidance sounded in the commentary forced the market participants to dump the euro. ECB’s Lagarde unfolded the guidance on the interest rates stating that an interest rate hike will arrive only after the end of the ‘Asset Purchase Program’ (APP), which will conclude in the third quarter.
The dovish stance on further policy announcements is backed by a troublesome situation in Europe due to a higher inflation rate, which is 7.5%, and a slow growth rate amid the Ukraine crisis. The situation is going to get worsened for the ECB as the oil prices are set for the next upside move and energy bills will haunt the households in Europe.
Meanwhile, the US dollar index (DXY) has regained strength amid a firmer rebound in the US Treasury yields. The DXY is balancing above 100.00 and is likely to extend gains considering the long weekend uncertainty in the world markets. The 10-year US Treasury yields have recovered two-trading sessions losing streak and have reclaimed a three-year high at 2.83%. The US Treasury yields shoot higher on aggressive tightening plans of the Federal Reserve (Fed) as Fed President and FOMC member John Williams on Thursday cited that the Fed should reasonably consider a 50 basis point (bps) interest rate hike in May’s monetary policy.