According to Jane Foley, Head of FX Strategy, point out that politics is another factor that has soured the outlook for the Euro and that Brexit has the potential to act as a drag on the Euro and other European currencies against the US Dollar.
Key Quotes:
“In April EUR/USD reached its lowest level since June 2017, breaching key supports in the 1.1184 and 1.1177 areas which, from a technical perspective, puts in view a potential move towards the 1.09/1.08 area. Since the market appears to be already holding short EUR positions, this target may prove to be ambitious. That said, we retain our target of EUR/USD 1.10 on a 6 month view.”
“While recent economic data suggest that the US economy continues to expand at a moderate pace, data from the German economy has repeatedly disappointed the market, resulting in more dovish guidance from the ECB. The April reading of German manufacturing PMI remains deep in contractionary territory while the latest numbers from the IFO survey were also softer than expected. Even though the German services sector remains better positioned and strong employment levels and looser fiscal policy settings are supporting domestic demand, the market is concerned about the hit to the country’s manufacturing and export sectors from slower Chinese growth. Going forward, fears are also building that the German export machine could be vulnerable to a step up in trade tensions between the US and the EU. Politics is another factor that has soured the outlook for the EUR.”
“Brexit has the potential to act as a drag on the EUR and other European currencies vs. the USD. May’s European parliamentary elections could also create jitters for the EUR given the rise of nationalism in the region. In recent domestic elections nationalist parties won more than 25% of the vote in Hungary, Austria and Switzerland and between 17% and 24% of the share in Italy, Sweden, Finland, Denmark and Estonia. Meanwhile France, Germany and Spain have seen support for far-right parties grow in recent years. Additionally Brexit supporters could be a disruptive force among UK MEPs. Polls suggest Euro-sceptics could win one third of seats in the European Parliament allowing for the formation of a minority that could block EU procedures and make the legislative process more cumbersome in areas such as foreign policy and freedom of movement.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.