EUR/USD: Strengthening trend remains firmly in place ahead of ECB policy meeting – MUFG

The EUR has regained upward momentum in recent weeks. Economists at MUFG Bank expect higher Eurozone rates, diminished recession risk and China reopening to provid more support for the shared currency. 

Downside risks to EUR limited from ECB policy update

“The EUR should continue to trade at stronger levels in the near-term supported by: i) hawkish expectations for further ECB policy tightening, ii) the diminished risk of a sharper slowdown in the Eurozone economies as natural gas prices continue to fall, and ii) China reopening optimism.”

“We see limited risk of a dovish policy surprise from the ECB in the week ahead that could trigger a significant EUR sell-off given the recent run of stronger Eurozone activity and core inflation data.”