News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 93.53%, while traders in France 40 are at opposite extremes with 75.05%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/1EwsVNUxRg
  • Heads Up:🇲🇽 Balance of Trade (OCT) due at 12:00 GMT (15min) Expected: $3.575B Previous: $4.385B https://www.dailyfx.com/economic-calendar#2020-11-27
  • Heads Up:🇮🇳 GDP Growth Rate YoY (Q3) due at 12:00 GMT (15min) Expected: -8.8% Previous: -23.9% https://www.dailyfx.com/economic-calendar#2020-11-27
  • Heads Up:🇩🇪 Bundesbank Balz Speech due at 12:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-11-27
  • Heads Up:🇧🇷 Unemployment Rate (SEP) due at 12:00 GMT (15min) Expected: 14.9% Previous: 14.4% https://www.dailyfx.com/economic-calendar#2020-11-27
  • Commodities Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 1.06% Gold: -0.18% Silver: -0.46% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/5Vb2TX4ZO6
  • Forex Update: As of 11:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.22% 🇳🇿NZD: 0.22% 🇦🇺AUD: 0.20% 🇪🇺EUR: 0.10% 🇨🇭CHF: 0.02% 🇬🇧GBP: -0.21% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/Ajn9ITnidH
  • Heads Up:🇪🇸 Business Confidence (NOV) due at 11:30 GMT (15min) Previous: -9.2 https://www.dailyfx.com/economic-calendar#2020-11-27
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/1G7CRsegRX https://t.co/FvfvZXCN32
  • Indices Update: As of 11:00, these are your best and worst performers based on the London trading schedule: France 40: 0.38% US 500: 0.38% Wall Street: 0.32% Germany 30: 0.12% FTSE 100: -0.48% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/dpPO3ALGfW
Euro Forecast: Concerns Linger Over Italian Budget, Rising Hard Brexit Odds

Euro Forecast: Concerns Linger Over Italian Budget, Rising Hard Brexit Odds

2018-09-24 11:00:00
Christopher Vecchio, CFA, Senior Strategist
Share:
Euro Forecast: Concerns Linger Over Italian Budget, Rising Hard Brexit Odds

Fundamental Forecast for EUR/USD: Neutral

- Euro gains over the past week have largely driven by signs that the Italian government will fall in line with the European Union’s budgetary restraints.

- A surprising amount of negativity at the Brexit Salzburg summit this week knocked the British Pound lower, and dragged the Euro down alongside with it.

- The IG Client Sentiment Indexhas been upgraded to ‘bullish’ for the Euro as retail traders continue to buy the US Dollar on dips.

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

The Euro was a top three performing major currency last week, only losing ground to the resurgent Australian and New Zealand Dollars, thanks to buoyed risk appetite around the globe. EUR/JPY led the way higher among the EUR-crosses, gaining +1.52%, while EUR/USD added +1.06% and EUR/GBP gained +1.03%. Amid a quiet economic calendar, the major catalyst for Euro gains was news that the Italian government wouldn’t run a budget deficit above 1.6% of its GDP, the threshold that European Commission officials have indicated would be necessary for approval and continued support from supranational institutions.

The key development to look out for with respect to the Italian budget will be what happens with short-term Italian debt. Recently, on August 31, the 2-year yield was as high as 1.465%; following the budget announcement this week, the 2-year yield fell as low as 0.630% (it closed the end of the week at 0.757%). It’s of no coincidence that the Euro rally in September coincided with a reduction of perceived short-term sovereign credit risk around Italy. If concerns around Italy are going to impact the Euro, it will be via another rise in short-term yields.

But if the Italian budget issue is about to fade into the background, the window between tensions is small. The return of ‘hard Brexit’ fears resulting from the surprisingly fractious Salzburg summit obviously hit the British Pound hard at the end of the week, but the spillover impact to the Euro was apparent as well. If odds of a disruptive exit from the EU increase, the uncertainty surrounding the impact to trade could be enough of a reason for the European Central Bank to push back its monetary policy timeline next year.

Elsewhere, the calendar may prove to be more of an influence this week than last. On Friday, the initial September Eurozone Core CPI is due in at +2.1% (y/y), a +0.1% increase relative to the annual pace observed in August. The core reading for Septemberis a slight increase over its Augustreading as well, due in at +1.1% from +1.0%(y/y). The Euro, on a trade-weighted basis, is essentially unchanged over the past year (after being up by over +9% y/y back in April 2018), it stands to reason that inflation has a natural cushion underneath it for the foreseeable future.

Nevertheless, with the ECB’s policy on a preset course – ending QE in December 2018 and raising rates in “summer 2019” – the impact the initial September Eurozone CPI report leaves on markets will be limited unless there is a significant deviation from expectations.

Lastly, looking at positioning, according to the CFTC’s COT for the week ended September 18, speculators remained net-long the Euro to the tune of 1.7K contracts, a drop from the 11.2K net-long contracts held in the week prior. Through September, and now likely for October, positioning is and will be a non-factor for the Euro (i.e. the risk of capitulation (covering) due to extreme positioning is extremely low).

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES