According to Jane Foley, senior FX strategist at Rabobank, in the past few weeks a lot of attention has been paid by investors to changes in dollar fundamentals but, less attention is being paid by the market to EUR specific news.
Key Quotes
“We would argue that the Eurozone has its own set of potential risks in the month ahead. Consequently upside potential for EUR/USD could be limited in the coming months despite the worsened outlook for the greenback.”
“A continuation of soggy data release from Germany and the Eurozone has the capacity to restrain the EUR this year. Given the potential threat coming from poor data investors will be speculating about the possibility of a watering down of forward guidance from the ECB. While the weakness of German economic data should provide EUR investors reason to pause, political risk has the capacity to stop them in their tracks.”
“Given the rise in wealth and income inequality in many countries in recent years, there is strong risk of the latter. It is possible that this year investors will have to watch the EU be forced to address whether its austerity led mantra is still suitable or palatable for the electorate. Against this backdrop there is still risk that EUR/USD could trade lower into the spring at the very least upside potential is likely to be constrained. Given the risks the both the USD and the EUR this year we expect choppy trading to persist in the months ahead.”
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