EUR/USD risks downside this week - Barclays

In the view of the Barclays Research Team, the EUR/USD pair is exposed to downside risks this week amid an expected broad-based US dollar rebound.

Key Highlights:

“EUR/USD to stay 'broadly range bound' but outline downside risks ahead this week

A rebound in the USD

Euro area growth is moderating and could be further negatively affected by a potential US-EU trade war.

We estimate that if the US implements its threat of a 25% car tariff against European car imports, 2019 Euro area growth could be hit by as much as 0.4pp, down from 1.6% to 1.2-1.3%.

A no-deal Brexit, as we have been arguing recently, would still have a significant effect for Europe, given that the UK is a major trading partner. 

While we expect no major escalation of political risks in Italy before the European elections, the current equilibrium is very fragile, especially against a backdrop of decelerating economic activity and banking sector fragilities.

Data are unlikely to be much of a tailwind either.”