Aila Mihr, analyst at Danske Bank, suggests that with a US-China trade deal postponed, focus for majors is clearly on where the global and the European cycle are heading and focus today will be on the German Ifo numbers.
“EUR/USD has been supported in recent weeks by rate spreads moving in its favour, but towards the end of last week sentiment clearly shifted despite – or rather due to – a dovish Fed.”
“Recession fears have clearly come back with a vengeance with the inversion of the US curve on Friday and to the extent that markets are grabbed near term by fears of a wider and deeper global slowdown. The scope for this to hit the EUR negatively is tangible in our view: the Fed is already priced for cuts, whereas the ECB is one of the few central banks that is effectively open for repricing in a softer direction given its option of restarting QE.”
“We continue to see risks in EUR/USD tilted to the downside short term and the plethora of Fed and ECB speakers this week could prove instrumental in this respect.”