Euro moved for about 0.2% around the level of 1.1816 to the US dollar when this news was written. That happened some times after the ECB announced the inflation target change of the EuroZone. 

Before, the EUR / USD was in its lowest record in three months up to 1.1780. The cause is the FOMC meeting minutes release which accelerated The Fed’s Tapering projection. 

The ECB president, Christine Lagarde, in her press conference yesterday evening stated that the European Central Bank will tolerate the inflation. It is especially if the speed is above 2%.

The aim is to guarantee the state economy recovery. This development is a quite significant change. Before, ECB targeted the inflation to be under and close to two percent. 

Is It a Bearish For the Euro? 

The tolerance for a higher inflation speed should have a bearish effect for the Euro. It is because that thing will push the ECB to maintain the ultra-low interest rate and massive monetary stimulus. 

That could happen in a longer period and it is actually an unfortunate situation for the capital owner. However, the market participants are now being more optimistic than before. 

That was after the Lagarde announcement where the ECB tolerance can make the whole economy situation is more profitable. They may extend their loosen monetary policy. 

In the other side, that condition can weight on the common currency because of the bigger liquidity. Euro can be benefiting in a long – term period. That was predicted by an analyst. 

The Euro Strengthening is Caused by the Technical Factor

Another analysts think that the Euro strengthening anomaly is caused more by the technical factors than the market responds. It is especially to the ECB announcement lately. 

The consequence is that the exchange rate can be moved again in a short-term period. The technical oversold condition and a bounce is maybe happened because it is the time. 

The change and tolerance for the inflation to move more than 2 percent doesn’t offer a support for the EUR/USD. Meanwhile, the US dollar slipped from the highest level in 3 months. 

The cause is for sure the Euro strengthening after ECB revised their inflation target. The increasing jobless rate in America is also the factors amidst the COVID-19 delta variant concern. 

Why USD is Weaker

The US dollar was hit by Euro after ECB decided their new inflation target stated in ther monetary review yesterday evening. As it is known, they are still in an effort to reach the target.

However, starting from today, the EuroZone Inflation target will be settled in 2% or more. The EUR/USD was sold in 1.1839 yesterday night. That increased by 0.40% from the opening price. 

Besides that, the US weekly jobless claim data released yesterday night added the dollar weight. The number of applications for unemployment benefits rose from 371,000 to 373,000 last week.

That is different to the consensus expectation which predicted the decline to 345000. This thing shows that the America Employment sector recovery from the pandemic is still unstable. 

No Surprise from the FOMC Minutes

Elsewhere, the June FOMC meeting minutes released yesterday was not surprising. The policy makers agree to take an action if the rising inflation creates a serious risk for the economy.

Howeber, the recovery in the United States so far is still not perfect. That meeting result also writes the different opinions in taking an action if a risk happened for certain conditions. 

The example is when the inflation is higher with the high jobless level as well. That is happened now. Some representatives highlight the data which is not stable funadamentaly. 

However, they realize that the condition to decrease the asset purchasing can be reached faster than the expectation. The Fed may announce that in August and September this year.