EUR/USD: Potential catalysts can drive additional gains in the pair – Danske Bank

FXStreet Insights Team FXStreet

EUR/USD has largely stabilized around the 1.08 mark following this week's rally, driven by the seismic shift in fiscal spending in the euro area, Danske Bank's FX analyst Kirstine Kundby-Nielsen reports.

Further upside potential for EUR/USD on a tactical basis

"As expected, the ECB meeting had a limited impact after the widely anticipated 25bp rate cut. The central bank maintained a meeting-by-meeting approach with no pre-commitment to a specific rate path. However, a shift in the ECB's statement, describing policy as now 'meaningfully less restrictive,' signalled that the current rate level is closer to the terminal rate, initially providing a slight boost to EUR/USD."

"Today, the focus shifts to the US NFP report for February. We expect a print of 120k, below the market consensus of 160k - a downside surprise that, if realized, could put downward pressure on US yields and the broad USD. Overall, we see further upside potential for EUR/USD on a tactical basis."

"While EUR optimism from increased fiscal spending may now be largely priced in, potential catalysts such as a ceasefire deal in Ukraine or a further deterioration in the US cyclical macro outlook - especially the latter - could drive additional gains in the pair over the next 1-3M."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.