Analysts at MUFG Bank, point out that recent developments and a board-based USD sell-off made it less likely for EUR/USD to reach their year-end target of 0.9300, even after the “less hawkish” European Central Bank meeting. 

Key Quotes:

“The main immediate takeaway for financial markets is that the ECB has become the latest G10 central bank to disappoint expectations for a more hawkish policy update. It follows dovish surprises from the RBA and BoC when they delivered smaller rate hikes, and together will further encourage near-term speculation that the Fed will follow suite and slow the pace of hikes at the end of this year as well. Building expectations that broader dovish policy shift from G10 central banks is already underway is providing some much needed relief for risk assets.”

“In the FX market, it has contributed to the USD correcting sharply lower since the end of last week although confirmation of slowdown in tightening from Fed officials has not yet been confirmed. Next week’s FOMC meeting on 2nd November could prove even more pivotal for near-term USD direction. Overall, recent developments including the plunge in the price of natural gas in Europe and broad-based USD sell-off have made it less likely that EUR/USD fall as low as our year-end target of 0.9300 even after today’s less hawkish ECB policy update.”