EUR/USD: Tug of war between Fed rate hike and ECB tapering concerns - BTMU

Analysts from The Bank of Tokyo-Mitsubishi UFJ, continues to see the EUR/USD pair with a bearish bias and expect it to trade between 1.07775 and 1.1000 next week.

Key Quotes: 

“The euro continues to remain under downward pressure against the US dollar in the near-term. Renewed upward momentum for the US dollar will be tested in the week ahead by the release of the latest US GDP report for Q3 and PCE deflator report for September. The GDP report is expected to reveal that the US economy returned to more solid growth in Q3 providing reassurance to the Fed and supporting their plans to resume rate hikes in December. The PCE deflator report is expected to confirm that inflation pressures are gradually firming as well.”

“The FOMC will meet in the week ahead and the updated statement could include a clear reference that it will decide on the appropriateness of a rate hike in December. The latest public opinion polls will be in focus ahead of the looming Presidential election. The polls would have to shift materially in favour of Donald Trump to undermine the US dollar. The euro has derived little support so far from evidence of stronger economic growth momentum in the euro-zone. In contrast, ECB taper concerns are having more impact on the eurozone bond market. If the sell-off in the euro-zone bond market accelerates it could temporarily lift the euro similar to in Q2 of last year.”