Erste Bank Research Team
Erste Bank
EUR/USD: How long will the bandwidth hold?
Over the past few weeks, the EURUSD has been trading at the lower end of the range that has existed since autumn of last year and dropped temporarily below the 1.13 mark. The volatility measured over a month has fallen further, but such levels were historically never sustainable. The question is in which direction the EURUSD will break out. We expect the coming economic data in both the Eurozone and US to refute the current economic pessimism in the markets. However, this should happen sooner in the US than in the Eurozone. The reason is that the Eurozone is still affected by uncertainty about the outcome of Brexit and the economic slowdown in China. These negative effects will subside, but this could take a few months. Until then, the economic outlook, and thus the interest rate outlook for the US, will be better, which suggests that there is still some potential for the dollar.
EUR/JPY: yen should continue weakening
Global sentiment has improved somewhat in recent weeks. In the trade conflict, there has been a rapprochement between the US and China and there could be a time lag for Brexit. The resulting increase in risk appetite has already led to a slight weakening of the yen against the euro. If this global ‘thaw' continues, we expect the yen's weakness against the euro to continue in the coming weeks. The consensus on Bloomberg expects the euro to remain stable against the yen at 126 in 2Q19. However, should the environment cloud over again, the yen could quickly strengthen against the euro.
EUR/CHF: global ‘thaw' weakens franc
Based on an increasingly friendly market environment, the Swiss franc weakened against the euro during the last weeks up to a trading level of around 1.14. In this environment, we expect the gradual weakening of the Swiss franc against the euro to continue in the coming weeks. At the SNB's forthcoming monetary policy assessment (March 21), we do not expect any changes in the direction of monetary policy. By the end of 2Q19, we foresee the Swiss franc to weaken slightly against the euro to a level of around 1.15. However, should geopolitical crises worsen acutely (trade dispute, hard Brexit, poor economic data from Italy), the franc could quickly strengthen against the euro at any time.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
Recommended Content
Editors’ Picks
AUD/USD pressures as Fed officials hold firm on rate policy
The Australian Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades around 0.6419.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold price edges higher on risk-off mood hawkish Fed signals
Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.
Runes likely to have massive support after BRC-20 and Ordinals frenzy
With all eyes peeled on the halving, Bitcoin is the center of attention in the market. The pioneer cryptocurrency has had three narratives this year already, starting with the spot BTC exchange-traded funds, the recent all-time high of $73,777, and now the halving.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.