EUR/USD not much changed after the ECB "recalibrates" PEPP purchases
Lagarde was clear in steering the latest ECB decision to reduce the pace of PEPP purchases away from being a "taper" but let's call a spade a spade, shall we not?
It is by some definition an operational/technical taper as they are also unlikely to finish using the full PEPP envelope by March next year - at least at this point in time.
However, the optics is what Lagarde is trying to play around with and as pointed out here, a taper is essentially no taper as the ECB will eventually come around to upsizing APP purchases some time next year, all things being equal with the economy.
So, where does that leave the euro?
Not really anywhere, to be honest. Economic growth from the reopening has peaked in the summer and while growth conditions are expected to be maintained through to year-end, they won't be anything near as robust given the latest global headwinds.
Inflation is a risk but while the more hawkish members in the ECB want to step up flexibility in dealing with that, I don't expect the central bank to reach a consensus as a whole to even come close to stepping back from the more accommodative policy.
As such, there isn't much bullish undertones for the euro in the big picture.
The only good news for the euro is that the dollar itself is not looking too hot as we gear towards the FOMC meeting later this month.
There are still a lot of mixed messages between economic data and what policymakers are preaching (as seen with the post-NFP narrative) and price action in Treasury yields this week clearly exemplifies the push and pull (and confusion) in the market.
So, putting everything together, what beckons next for EUR/USD?
If anything, the pair seems rather caught between 1.1700 and 1.1900 at the moment and I would expect that range to keep up through next week as the market continues to chop around and search for more answers.
The push and pull is not going to give traders much to work with but at least we know that price action is resting in a definitive range and that sets up a potential for a bigger move when a break comes by on either side of that.