Euro Depreciated despite Hawkish European Central Bank Statement

Euro unable to outrun the US dollar

The euro-dollar (FXE) exchange rate closed the week ending April 27 at 1.2131, depreciating 1.28% against the US dollar (UUP). This depreciation of the European currency was surprising to a few market participants, as there was no major disappointment in economic data or the ECB guidance. The European central bank or ECB left policy rates unchanged but was upbeat about the economic progress in the euro area. The euro depreciated last week because the ECB would trail the US Fed in raising rates and the US dollar is preferred over any other currency.

European equity markets, which are tracked by the Vanguard FTSE Europe ETF (VGK), remained positive, in line with the global markets. The German DAX (DAX) closed last week with gains of 0.32%, Euro Stoxx (FEZ) was up 0.70%, and France’s CAC gained 1.30%.

Euro Depreciated despite Hawkish European Central Bank Statement

Euro speculative bets decreased from the previous week

As per the latest “Commitment of Traders” (or COT) report, released on Friday by the Chicago Futures Trading Commission (or CFTC), speculators have decreased their bullish positions on the euro by 20,882 contracts as of April 24. The total net speculative bullish positions on the euro (EUFX) decreased from 151,476 contracts to 130,594 contracts. The trimming of long euro bets should have continued after April 24 as the US dollar continued to rally, and we can see that change in this week’s CFTC positions update.

Outlook for the euro

There are a few important data from the euro area coming out this week, but the price action for the shared currency is likely to be influenced by the demand for the US dollar. European GDP and inflation reports are due to be reported this week, but unless there’s a strong negative surprise, a major impact on the euro isn’t likely.