EUR/USD slipped below a key area of support in the form of the March lows at 1.0806 in recent trade and has subsequently gone on to slide under the psychologically important 1.0800 level for the first time since May 2020. At current levels around 1.0790, the pair is trading with on the day losses of around 0.9%, having reversed more than 1.30 pips lower (or 1.2%) from earlier session highs in the 1.0920s. 

The drop in EUR/USD is a result of euro weakness after the ECB failed to live up to hawkish expectations ahead of Thursday's policy announcement. Markets had clearly been expecting that, given the recent worsening of the inflation outlook in the Eurozone, the ECB might signal intentions to accelerate the pace of QE tapering and intentions to perhaps lift interest rates a few months sooner (i.e. in Q3 rather than Q4). 

But in its statement on monetary policy, the bank did not signal any such policy change, a message that ECB President Christine Lagarde reinforced in the post-meeting press conference. Eurozone money markets subsequently readjusted and pared back on tightening bets.

As of one hour ago, the implied probability of a 25 bps hike from the ECB in July had fallen back to around 50% from closer to 75% prior to the meeting. Meanwhile, the total number of rate hikes seen but the year's end was pared back to 63 bps from 70 bps.