Lame Duck US President is EUR/USD Bullish in 2018
|With recent EUR/USD uptrend initiated by the hints of the ECB revisiting the possible asset purchasing reduction and changing of communication, it is clear that the most important factor of the EUR/USD is the central bank action.
There are political and economic risks to the scenario of EUR/USD extending its recent Bullish run further, but the weight of these risks is lower.
As the ECB is still very cautious with the language it uses in terms of monetary policy, the signs of above-expected growth are in place with the ECB raising its short-term staff macroeconomic projections for GDP in both September and December 2017. The above expectation strong growth supports the view of ECB being more willing to ponder further asset purchasing reduction or modification, and that is EUR/USD Bullish.
The Political risk for the EUR/USD is related to both Italian and the US mid-term elections. Although Italian political system is fragmented and the risk of building a sustainable government is high, even more important is that there is no real Eurosceptic party to scare markets of possible Italexit. The US mid-term elections scheduled for November also support Bullish EUR/USD view with a traditional outcome of Republican party losing. That would complicate position of Donald Trump trying to push the laws he proposes. Last year’s tax reform might as well be the deed of his presidency.
A “lame duck” US President is actually good for EUR/USD.
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