EUR/USD: At risk of further dips below 1.06 in the very near-term – Rabobank

EUR/USD has recovered to above the 1.06 level. The actions of the ECB today and how Lagarde responds to the crisis will be instrumental in guiding the outlook for the Euro, economists at Rabobank report.

Expect a volatile ride for the EUR this afternoon

“It cannot be assumed that the EUR will find support on a 50 bps rate hike. If such as move is judged to be potentially damaging to confidence in the financial sector and in the broader economy, such a move could weigh on the performance of the single currency.”

“We would expect a volatile ride for the EUR this afternoon, but in the absence of a strong commitment by the ECB to stand behind banks (which would trigger issues connected with moral hazard), we see risk of further dips below EUR/USD 1.06 in the very near-term in reflection of ongoing jitters in the financial sector.”