COMMENT-EUR/USD's range trade may persist as ECB may not go it alone

EUR/USD erased losses driven by geopolitical tensions Friday and turned positive on improved risk sentiment and longs may be breathing a bit easier as the prospect the ECB will cut ahead of the Fed may dwindle a bit.

ECB President Lagarde said Friday risks to the inflation outlook are two-sided and also reiterated the Governing Council is not pre-committing to a particular rate path.

Earlier this week she said the ECB monitors the exchange rate and that forex moves may have an impact on inflation.

Wednesday's remarks could be a sign the ECB is concerned a depreciating euro will drive imported inflation.

Lagarde's rhetoric drove investors to price in less than three ECB 2024 rate cuts and also reduce the dollar's yield advantage over the euro as German-U.S. spreads (US2DE2=RR) traded their tightest since April 10.

Fed rhetoric on rate cuts and the prospect of rising global inflation could lead the ECB to take a less dovish tone going forward.

Should further ECB rhetoric suggest a June cut is off the table EUR/USD may rally and return to its recent 1.0700-1.1150 trading range.

For more click on