EUR: Little real buying interest ahead of ECB - BBH

The euro made a marginal new low early in European turnover and held barely above the spike low on March 1 to $1.2155 as today is the first session since January 11 that the euro has not traded above $1.22, points out the research team at BBH. 

Key Quotes

“The euro stabilized as the European morning progressed, but there seems to be little real buying interest it ahead of Draghi's press conference following the ECB decision.  There is also a very large option (5.2 bln euros) struck at $1.22 that expires at shortly after when the press conference typically ends.”

“Based on recent comments by Draghi, we expect the ECB to look past the recent softer economic data and have confidence that with continued  "patience and persistence" the inflation target will be achieved.  Given the price action, we suspect that such sentiment would be seen as less dovish and spur a euro bounce.  A squeeze higher would be tested in the $1.2240-$1.2250 area, where incidentally there is a 717 mln euro option expiry today ($1.2255).”

“Although the euro at the lower end of a three-month range against the dollar, it is firm within its range on a real trade-weighted basis, and this is ultimately more important for policymakers than a bilateral nominal rate.  There is little for Draghi to say about the currency, which he often reminds, is not a policy objective in itself but feeds into its economic assessment.”