Top FX Headlines Talking Points:
- The Euro[1] saw a bout of weakness at the end of August and at the start of September with fresh yearly lows coming into play versus the Japanese Yen[2] and US Dollar[3].
- However, it may be the case that markets have gone ‘too far, too fast’ – there is now a 57% chance of a 20-bps rate cut at the September ECB meeting; a 10-bps rate cut remains 100% priced-in.
- The IG Client Sentiment Index suggest that EURJPY[5] may rebound while the outlook for EURUSD[6] is mixed.[4]
Looking for longer-term forecasts on the British Pound[7]? Check out the DailyFX Trading Guides.[8]
The Euro saw a bout of weakness at the end of August and at the start of September with fresh yearly lows coming into play versus the Japanese Yen and US Dollar. Much of this was spurred on by comments made from incoming European Central Bank President Christine Lagarde, who last week signaled that she was willing to take the ECB’s interest rates deep into negative territory to stimulate growth.
In turn, interest rate markets have aggressively priced-in a more dovish ECB moving forward. The juxtaposition of retreating Fed rate cut odds and rising ECB rate cut odds has proven negative for EURUSD, and in turn, other EUR-crosses associated with risk like EURJPY. But we may be at an extreme: it stress credulity to believe that rates markets will become any more aggressive from here, given the lay of recent economic data.
Eurozone Economic Data Still Disappointing
The past several weeks have seem Eurozone economic data improve, relatively speaking, at least when trying to take a look the
