Euro rebounded sharply against the US dollar after ECB Kazaks indicated that the QE program could end at the start of the third quarter. Earlier, Christine Lagarde said that there was a possibility of ending the QE program sooner than before the end of Q3. Decisions may be taken during the June meeting.
In addition, Kazaks says that in such a case interest rates could rise even in July. It is quite a hawkish statement and is in contradiction with the recent relatively dovish message from the ECB. However, it is worth remembering that Kazaks comes from the region of the Baltic states (Lithuania), where the attitude towards monetary policy was usually more hawkish.
In addition, it is worth noting that bond yields, both in the US and in Germany moved lower on Wednesday. Yesterday, the yields of the German 10-year bonds reached 0.92% level. Today, however, one can observe a retraction below 0.90%. Interestingly, the real 10-year yields (10-year inflation-linked bonds) in the US for the first time since March 2020 jumped to positive territory.
EURUSD rose after recent ECB comments, but this move may also be driven by a slight decline in US yields. Source: xStation5