Euro gains resume

Our prop desk closed out a long EUR/USD position yesterday for a healthy profit. The trade had been in play since earlier this month. Support for the Euro remains however with a notable long EUR/JPY and also long oil positions are being established.

Daily Round up

Another day with fundamental data looking rather limited, although the political drivers remain very much in force. The US is building its military presence on the Korean peninsula, whilst there’s also a degree of expectation hanging over Donald Trump’s tax reform plans which we’re expecting to hear more about in the day ahead. The elephant in the room however is arguably Friday’s deadline for the US Congress to agree on a budget. Historically, a move into deadlock will see the greenback weaken.

Fundamental Analysis – Euro gains resume


The common currency traded higher yesterday against the US dollar as traders continued to buy into the fact that centrist candidate Macron would be likely to win the French Presidential run-off that’s scheduled for a week on Sunday. HSBC had mooted that a target of 1.1350 would be a reasonable outcome so we still have some way to travel there, but a degree of confidence from the US (see below) is likely pinning back progress, too. With little data due from the Eurozone during today’s session, the march higher may prove somewhat sluggish but there seems little reason to believe the upward momentum on EUR/USD will stall.

USD/JPY has been marching higher too, driven by optimism over tax reform plans that are expected to be unveiled by Donald Trump during the day ahead. The market’s acceptance of these proposals will be critical in ensuring the recent gains can be sustained, as again data beyond this is looking relatively thin on the ground in the short term. That resurgent new home sales figure yesterday is certainly something worth cheering too, as it’s more data like this that will likely encourage the Fed to make its next move over tighter monetary policy.

The Aussie dollar has found further weakness overnight with a shortfall in inflation data for Q1 proving unsettling for the market, especially when the RBA had been talking up expectations here. Admittedly the print did just scrape into the central bank’s target zone, but that tariff imposition on Canadian timber imports by the US is also a likely cause for concern here. The import and export price data that’s due for release at 1.30am GMT tomorrow may provide more momentum here in the short term, but as it has acknowledged, the RBA is still working with challenging conditions.

Expectations are for a meaningful draw in US oil inventories this afternoon and that may help provide some support for crude, which is now languishing below the $50/barrel level. This, combined with the fact Opec appears committed to extending those production cuts does suggest that oil could be sliding into oversold territory.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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