EUR/USD: Mildly bearish amid Euro under-performance

Analysts at ING see the EUR/USD pair moving with a mildly bearish perspective for next week and see it trading in the 1.0990/1.1110 range.

Key Quotes:

“The EUR is performing pretty poorly, even though many asset classes are starting to price in a more positive trade environment. We think this FX performance represents the emergence of the EUR as a preferred funding currency on the view that interest rates in the eurozone will remain at rock bottom throughout 2020. Supporting this view should be German 3Q19 GDP data released on Thursday, which may well show a technical recession. Driving that weakness will be the industrial sector, and Eurozone IP data (Wednesday) should also tell the story of the manufacturing sector grinding to a halt. We doubt a modest uptick in the German ZEW survey (Tuesday) will provide much of a lift – instead, the November PMIs (released 22nd-25th) will be more significant.”

“In the US, the focus will remain on the trade story. The market would prefer having a date and a location (none exists at the moment) for a US-China trade deal and without that it may be reluctant to take risk assets (and Treasury yields) too much higher. This especially so because Chinese October activity data releases out later in the week should be soft. Unless US October retail sales (Friday) collapse, however, it looks like the recent benign conditions can continue; we're waiting for this year’s monetary stimulus to show up in better confidence numbers. Wednesday’s release of US October CPI figures – headline still at 1.7% YoY – are unlikely to mean much to a market more focused on activity right now. There’s also Fed Chair Powell’s address to Congress on Wednesday – though like other central banks the Fed looks to be in wait-and-see mode, pausing to see if their three rate cuts this year have curtailed the slow-down.”

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