Fundamental Forecast for EUR/USD: Neutral
- The Euro[1] is unlikely to get help from Mario Draghi and the ECB this week as policy is on a (mostly) preset course until at least June 2019.
- Rising trade tensions with the United States coupled with meandering inflation expectations means traders should keep expectations for any change in policy very low.
- The IG Client Sentiment Index[2] suggests a bullish outlook for EUR/USD[3] after positioning shifts in recent days.
See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides[4].
The Euro finished in the middle of the pack last week, gaining ground against four currencies while losing ground against three. EUR/CHF[5] was the worst performer, dropping by -0.61%, while EUR/GBP[6] was the best, adding +0.98%; EUR/USD was volatile but mostly directionless, adding a mere +0.33%. While the economic calendar last week was the main culprit for the lack of significant movement – there were no high rated events on the docket – the coming week features a multitude of event risk.
Starting on Tuesday, the preliminary July PMI readings for Germany and the broader Eurozone should provide a spark for price action. Typically these data releases generate a good deal of interest, although it is worth noting that the lack of meaningful change between the final June PMIs and the preliminary July PMIs may dampen the prospect for a significant move in EUR-crosses. On Wednesday, the German IFO survey for July release draws attention, although once again the lack of significant change expected in the readings limits the potential impact on markets.
