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Euro Forecast: EUR/USD Weakness Can Resume if EZ CPI Declines Again

Fundamental Forecast for EUR/USD: Neutral

- The Euro[1] fell against five of the seven other major currencies, although EUR/USD[2] nearly closed the week positive.

- The upcoming update to the April Eurozone CPI report could easily undermine EUR-crosses mid-week.

- The IG Client Sentiment Index[3] has returned to a neutral view on EUR/USD after the pair’s late-week rebound.

See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides[4].

The Euro finished near the end of the pack during a relatively quiet week – no EUR-cross gained or lost +/-0.60% – while the European Central Bank stayed largely quiet and the economic calendar offered few meaningful releases. EUR/USD, which was trading below 1.1830 last Wednesday, finished down only by -0.14% to close at 1.1938. EUR/CAD[5] was the worst performing pair (-0.54%) while EUR/NZD[6] was the best (+0.59%).

The prospect for an uptick in volatility among the EUR-crosses is high in the days ahead given the outlook for the economic calendar. Several ECB policymakers will speak over the course of the first three days of the week, including ECB President Mario Draghi on Wednesday in Frankfurt. There is no ECB meeting until June 14, so policymakers’ comments like the ones due out in the days ahead will have to satisfy.

On the data front, the first revision to the Q2’18 Eurozone GDP report is due out on Tuesday, but no change is expected from the initial readings of +0.4% q/q and +2.5% y/y. The report should have minimal impact on the Euro. Were a revision lower to materialize, given the state

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