Analysts at CIBC, expect the euro to find support versus the USD, attributed to either cyclical stabilization – indicated by business sentiment - or flow-driven moves. The key confirmation of this will be the German economy’s performance going forward, as it narrowly avoided recession last quarter according to them.
“The ECB is currently on hold, as markets await greater details on TLTRO terms at the June meeting. This implies that EUR impetus will come from either cyclical stabilization or flow-driven moves, attributed to its current account surplus. We expect the euro to begin finding some support versus the USD, as it appears to already be breaking out on a trade-weighted basis.”
“We look to early signs of stabilization for cyclical indicators of the Eurozone economy as the reason behind that movement. The key confirmation of this will be the German economy’s performance going forward. The world’s fourth largest economy narrowly avoided a recession last quarter, and there are now signs of a stabilization in business sentiment.”
“From a balance of payments perspective, we’ve already seen net portfolio outflows reduced as the ECB QE program has wound down. The commensurate gain in the EUR has yet to be realized, but we expect that it simply requires more time. Additionally, a broad USD shock is a risk to under-hedged EUR investors that may need to liquidate assets and repatriate funds, thereby causing an increase in volatility.”
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.