EUR/USD: Weak Eurozone fundamentals to dampen further upside – MUFG

Lee Hardman, currency analyst at MUFG Bank, expects the EUR/USD pair to move with a neutral bias next week, between 1.1000 and 1.1250.  

Key Quotes:

“The euro has been stabilizing at higher levels against the US dollar over the past week after failing to break above resistance from the 200-day moving average at just above the 1.1200-level.The euro’s upward momentum has now stalled in the nearterm undermined in part by the release of the latest PMI surveys for October which continued to signal that the euro-zone economy continues to slow heading into year end and is moving closer to stagnating. The release of the euro-zone GDP for Q3 will be scrutinized closely in the week ahead. Weak growth and inflation supports the ECB’s decision to implement an aggressive package of easing measures.”

“It remains to be seen whether recent optimism over progress towards a US-China trade and Brexit deal will eventually encourage a pick-up in growth. The EU is expected to grant the UK another Brexit extension in the week ahead, most likely until the end of January. However, it has become less clear how the UK government then plans to proceed to pass the Brexit deal through parliament. If the government pursues a snap election and is successful, then the additional political uncertainty could act as modest dampener on the pound and euro, although No Deal risks should remain diminished.”