EUR flows: EUR up as yields rise on Lagarde
Lagarde sounding less dovish, market now not fully pricing in any more easing this year. EUR firmer, but EUR/USD upside may be more limited than EUR gains on the crosses.
Lagarde sounding more hawkish than expected, particularly with her comment that she would not exclude a shift to considering rate rises. Front end EUR yields are up more than 10bps on the day and the market is now no longer fully pricing another rate cut this year, with this being priced as just a 60% probability by December. The EUR has rallied on the statement, gaining across the board with EUR/USD up 30 pips since the start of the press conference. EUR/USD hasn’t been particularly rate sensitive of late, so the upside for the EUR may be more clear cut against the CHF, GBP and scandis.
