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EUR/USD corrected due to a variety of reasons, with the chaos in Catalonia being the last issue. What’s next?

Here is their view, courtesy of eFXnews:

BTMU FX Strategy Research notes that the EUR weakened in September, the first calendar month of decline since February.

Given the 12.6% gain in the six-month period between, some correction is understandable

The positive investor sentiment in the euro-zone, in part fuelled by the election victory of Emmanuel Macron, may be somewhat undermined by the uncertainty created over the election result in Germany. While Angela Merkel is set to be Chancellor for a fourth term, the CDU/CSU support dropped 8.5ppts to 33% and must now try and form a coalition with the FDP and Greens. We expect a deal to be reached in Germany and also assume no major escalation of turmoil in Spain fuelled by unrest in Catalonia.  Hence, euro implications, while modestly negative are not significant,” BTMU argues.

The election result is further reason to believe that the move higher may have come to an end for now. However, we still see scope for renewed EUR appreciation in 2018  as the ECB acts to reverse policy,” BTMU concludes.

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