EUR/USD looks north towards 1.1600 on ECB’s hawkish swing – Societe Generale

In the wake of the latest hawkish twist from the European Central Bank (ECB), EUR/USD is likely to head higher towards 1.1600, analysts at Societe Generale noted.

Key quotes

“We now expect ECB asset purchases to end by mid-year, and rates to rise in the second half. The March 10 meeting now takes on increased importance as plans will be much clearer by then. The front end of the rates curve prices 40bp by the end of the year now, which seems unlikely, but that's not a reflection of expectations, more of hedging."

"It's the suddenness of the turn, relative to expectations, which matters for Europe bond and currency markets and can increase the short-term support the euro gets from this.”

“Positioning in euros was fairly light going into the meeting, but this was a genuine surprise to the vast majority of market participants.”

“EUR/USD can spike to, say, 1.16, if risk sentiment remains strong.”

“If you want to buy Euros, EUR/GBP is on its way back to 0.85 and beyond. EUR/JPY is also an attractive buy here, as the BOJ is increasingly left as the only dovish central bank around."