Fundamental Forecast for EUR/USD: Neutral
- The Euro[1] slipped at the end of the week after ECB President Draghi made clear that no rate hikes are coming for a year or more.
- Neither the July Eurozone Consumer Price Index or the Q2’18 Eurozone GDP release will materially impact rate expectations, and therefore, the Euro.
- The IG Client Sentiment Index[2] has shifted to a ‘mixed’ outlook from ‘bullish’ earlier last week.
See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides[3].
The Euro struggled in the second half of the week, finishing as the third-worst performing major currency. Knocked lower by the European Central Bank and President Mario Draghi’s press conference on Wednesday, EUR/CAD[4] led the way lower by -1.22%, while EUR/USD[5] dropped by -0.57%. But with EUR/CHF[6] and EUR/GBP[7] pushing higher, it’s too soon to say that a broad bearish bias for the Euro is appropriate.
Even though the ECB’s policy meeting this week resulted in a weaker Euro over the course of President Draghi’s press conference, there was no significant shift in current policy or future expectations, so we shouldn’t necessarily be anticipating Thursday’s meeting to be ground zero for a bearish trend to start anew.
As was anticipated ahead of the meeting[8], the ECB’s July policy statement – and Draghi’s press conference – were near carbon copies of June’s iteration, insofar as the ECB did not move on rates, change its expected timeline for ending its QE program (December 2018), or change its expected timeline for its first
