Euro (EUR) consolidated near recent highs. Focus today on European Central Bank (ECB) decision. Policy rate is widely anticipated to be on hold but attention is on staff projection. Recent comments from ECB officials were somewhat more upbeat about economy – from growth to labor market. EUR was last seen at 1.1734 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

ECB rhetoric turns more hawkish on inflation

"Lagarde hinted at a potential upgrade to the staff projections for growth. Schnabel had earlier struck a hawkish chord in saying that she is rather comfortable with market expectations that ECB’s next move will be a hike though she declined to comment on the timing of next rate move. She went on to caution about inflationary pressure, noting that the decline in core inflation has stalled at a time when the economy is recovering, the output gap is closing, and fiscal policy is expanding."

"Kazimir pointed out that the labour market remained tight. On inflation, core CPI rose by 2.4% yoy. Lane noted that had inflation had 'moved in the opposite direction' relative to staff projection for inflation to move below target and on policy outlook. Other members including Kazimir and Villeroy had advocated for hold. On net, such a rhetoric suggests that ECB easing cycle may have ended."

"Mild bullish momentum on daily chart intact while RSI rose to overbought conditions. Slower pace of gains not ruled out but bias remains to buy on dips. Resistance at 1.1760, 1.1820 levels. Support at 1.1640 (100 DMA), 1.1610 levels (21, 50 DMAs)."