Lee Hardman, Currency Analyst at MUFG maintains a bearish bias for the shared currency and foresee near-term range for the EUR/USD major between 1.0400-1.0800 band.
"We expect the euro to remain under downward pressure against the US dollar in the week ahead. Our short-term valuation model continues to signal building downside risks although the EUR/USD rate has temporarily found some technical support at around the 1.0600-level. The Fed has signalled that it plans to raise rates again soon which could come as early as at the March or May FOMC meetings. The release of the latest US CPI report for January will have made the Fed more concerned over upside risks to inflation. In contrast, the market still appears too complacent over the scale of monetary tightening likely in the coming years. We expect the minutes from the February FOMC meeting to be interpreted more hawkishly than the accompanying policy statement. The market is still eagerly awaiting further details of President Trump’s tax plans which could provide support for the US dollar."
"Higher political risk in Europe remains a weight on the euro in the near-term. The market will be watching closely developments at the upcoming Eurogroup meeting on the 20th February for evidence that the Troika are moving closer to reaching a compromise agreement to extend financing to Greece. The latest PMI surveys for February are expected to signal that the economic growth in the euro-zone continues to strengthen providing some support for the euro."
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