Jane Foley, Senior FX Strategist at Rabobank, points out that the EUR/USD has pushed mostly higher since the start of Asian trading today in tune with a broad-based softening in the tone of the USD.
Key Quotes
“While EUR/USD has moved away from its November low near 1.1216, the EUR appears to be lacking the conviction to break out its November trading range. We would link this with the poor tone of many recent Eurozone data releases in addition to the political pressures currently evident in both Italy and France.”
“Without reform the French economy is less attractive to investors. Without popular support, Macron may not be able to extend his programme of increasing integration across the EU, particularly given that Chancellor Merkel’s focus has been drawn back to domestic German politics in recent months. This is disappointing for investors.”
“The backdrop of political discontent and the rising threat of market unfriendly populism in Europe is likely to cloud the outlook for the EUR in 2019. The risks to the single currency would be accentuated if the recent bout of softer than expected economic data is continued. While we expect a worsening outlook for the USD in 2019 to allow EUR/USD to end 2019 moderately higher than current levels, the Eurozone could throw up downside risks to this view.”
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