EUR/USD touches 1.10; dollar weakness to blame

There’s a scattering of long USD interest currently in play, although positions aren’t looking to be all that profitable for now. Short CHF trades closed out over the last 24 hours have had mixed success, whilst a long EUR/JPY trade has been the most successful, now closed for a notable profit.

Daily round up

After yesterday’s very quiet start to the week in terms of fundamental data, the pace will accelerate a little today although the big potential drivers for the market seem to remain in the political rather than economic sphere. The run into the French parliamentary elections will be increasingly in focus as whether Macron’s new En Marche! Party can gain a majority will be critical in delivering any European reform, whilst the Donald Trump saga continues, with suggestions that he may have leaked secrets to the Russians being the latest salvo that’s served up. Any serious suggestion of impeachment would likely drive some notable risk off trades.

Fundamental Analysis – EUR/USD touches 1.10; dollar weakness to blame


The Euro may be working its way higher but consensus is suggesting that it’s dollar weakness, rather than any signs of optimism for the single currency, which is driving the move. During yesterday’s admittedly quiet session, the US Empire Manufacturing reading offered little that was worth cheering so attention will now turn to prints including US building permits at 12.30pm GMT and the industrial production reading at 1.15pm GMT. However the reality is if we see a continued pattern of downbeat readings, and especially given the lacking inflation print at the end of last week, it’s going to make a June rate hike that bit harder for the Fed to justify.

A slew of numbers out of the Eurozone today could help sustain a move above 1.10 against the greenback. The Q1 GDP reading, March’s balance of trade and the ZEW economic sentiment readings are all due for release at 9am GMT and with the outlook for the currency union having essentially turned right around since the start of the year, more positive news here should have an consequent effect on the exchange rate. Greece remains the risk factor here with lawmakers set to vote later in the week over extending the country’s austerity measures to secure further bail out funds – this should be passed, although growing pubic disquiet over the situation could still prove to be too great a barrier.

Westpac Bank will publish its latest consumer sentiment report at 12.30am GMT tomorrow and this will likely find itself under a degree of scrutiny. The RBA is undertaking a delicate balancing act right now, so anything that shows demand softening will likely be welcomed. The central bank has little desire to hike interest rates quickly, other than in a bid to manage consumer debt and with that marked jump in AUD/NZD late last week, this is precisely the sort of pair where profit taking could be seen if tonight’s print looks too soft.

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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