On Thursday, the exchange rate of the Euro/Dollar currency pair fell to the level of 1.1760.
The European Central Bank kept rates unchanged, as expected, and said that rates will remain at the current level or lower until forecasts show progress. It may take some time for participants to evaluate the new recommendations, given that this is the first press release after the strategy review.
The European regulator unveiled new policy guidance on Thursday that hints at even longer support for the bloc's struggling economy in line with its recent commitment to raise inflation, which is almost 2% below the ECB's target. Having unveiled a new strategy and adjusted inflation target just two weeks ago, the Central bank said that long periods of low inflation will require particularly strong or constant political support. It is expected that rates will remain at the current or lower level until inflation reaches the target level of 2%, well before the end of the forecast horizon.
Earlier, the ECB promised that interest rates will remain at the current or lower level until the inflation forecast in the forecasts steadily approaches the level close to the target, and the dynamics of core inflation will not show a similar upward trend. Thus, the new forecast can be considered softer in relation to the past, which caused another fall in the exchange rate of the single currency.
In our forecast, we expect a further decline in the Euro/Dollar exchange rate to the levels of 1.1740, 1.1720 and 1.1700.