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.

Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Bearish
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • Forex Update: As of 12:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 1.50% 🇦🇺AUD: 1.39% 🇬🇧GBP: 1.30% 🇪🇺EUR: 0.72% 🇨🇭CHF: 0.62% 🇯🇵JPY: 0.26% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/LT66cMBc99
  • Heads Up:🇺🇸 Chicago Fed National Activity Index due at 12:30 GMT (15min) Previous: -4.19 https://www.dailyfx.com/economic-calendar#2020-05-26
  • ECB would likely launch infringement procedure against Bundesbank if its stop buying bonds under PSPP - sources
  • ECB seen purchasing German bonds even if Bundesbank is forced to quit PSPP, according to sources
  • 🇲🇽 GDP Growth Rate YoY Final Actual: -1.4% Previous: -0.5% https://www.dailyfx.com/economic-calendar#2020-05-26
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.64%, while traders in US 500 are at opposite extremes with 75.52%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/5aSCLBqXc1
  • Heads Up:🇲🇽 Economic Activity YoY due at 11:00 GMT (15min) Expected: -3.5% Previous: -0.6% https://www.dailyfx.com/economic-calendar#2020-05-26
  • Heads Up:🇲🇽 GDP Growth Rate YoY Final due at 11:00 GMT (15min) Previous: -0.5% https://www.dailyfx.com/economic-calendar#2020-05-26
  • Emerging market currencies haven’t been treated equally by the effects of global contagion, even if most have suffered to some degree. However withdrawal of investment flows could hit them all. Get your market update from @DavidCottleFX here:https://t.co/QzNoNYgMgP https://t.co/rIrzpGTgvn
  • Chinese President Xi says will step up preparedness for military combat
Euro Forecast: After G20 Summit, Attention Returns to Italy's Budget

Euro Forecast: After G20 Summit, Attention Returns to Italy's Budget

2018-12-02 15:00:00
Christopher Vecchio, CFA, Senior Strategist
Share:
Euro Forecast: After G20 Summit, Attention Returns to Italy's Budget

Fundamental Forecast for EUR/USD: Neutral

- Both Italian politicians and European policymakers in Brussels remain entrenched in their respective negotiating positions, and now the European Commission is ready to punish Italy.

- EUR/USD downside may be somewhat limited, particularly after the US Dollar’s fundamental backdrop eroded last week thanks to the Federal Reserve.

- The IG Client Sentiment Index continues to suggest more downside ahead for the Euro.

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

A broad rebound in risk appetite propelled higher yielding currencies and risk-correlated assets higher at the end of November, leaving the Euro decidedly mixed by the end of last week. EUR/NZD and EUR/AUD led the way lower, dropping by -1.52% and -1.19%, respectively, while EUR/JPY was the top performing EUR-cross, adding +0.36%. Meanwhile, with concerns about Brexit persisting, EUR/GBP was able to edge higher by +0.33%.

Data released on Friday was particularly concerning for the Euro, as the most important data release of the week also proved to be the most disappointing. The preliminary November Eurozone CPI came in at +2.0% from +2.2% (y/y), while the core CPI reading registered +1.0% versus +1.1% expected (y/y). These data have mirrored the decline in inflation expectations in recent weeks, with the 5-year, 5-year inflation swap forwards dropping from 1.679% to 1.625% over the past four-weeks.

Put into context of the recent drop in energy prices (Brent Oil is down by -19.4% over the past month) and the relative elevation of the trade-weighted Euro (+1.42% y/y thanks largely due to EUR/GBP) it would seem that a soft patch of inflation is due ahead. These facts may very well give the European Central Bank another reason to push back its timeline for its first rate hike, even if it does follow through with ending its QE program later this month. After all, in recent meetings policymakers have openly riffed on another TLTRO (in lieu of continuing the QE program).

The coming week will offer very little on the economic calendar, at least in terms of information that will be as important as the preliminary inflation data seen at the end of last week. The final Q3’18 Eurozone GDP release may garner some attention, but given that this is second revision, odds of a significant change (and thus, market reaction) to the headline print are thus limited. In general, Eurozone economic data has been largely disappointing, with the Eurozone Citi Economic Surprise Index having further eroded from -56.7 on November 2 to -62.9 on November 30.

Otherwise, the festering Italian debt crisis will return to forefront for market participants. From the perspective of Italian politicians in Rome, there is a desire fulfill key campaign promises, which will lead to increased deficit spending in the near-term. For European policymakers in Brussels, the concern is that large deficits will raise the odds of a larger-scale Greece-style crisis (Italy’s debt-to-GDP ratio is 130%) for the Eurozone’s third-largest economy.

With the European Commission moving towards a debt-based excessive deficit procedure which could culminate in a fine worth 0.5% of GDP – roughly €9 billion – it seems more tension is destined in the near-term. The vote on the excessive debt procedure would take place in late-January 2019, so there is still time for negotiation and de-escalation; the clock is ticking.

Lastly, in terms of positioning, according to the CFTC’s COT for the week ended November 27, speculators increased their net-short Euro positions to 55.1K contracts, an increase from the 47.2K net-short contracts held in the week prior. Positioning has started to become interesting once more, but still remains on the historically light side and thus the risk of capitulation (short covering that would send the Euro sharply higher) remains 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.

OTHER WEEKLY FUNDAMENTAL FORECASTS:

Japanese Yen Forecast: USD/JPY Rate Vulnerable to Less-Hawkish Fed Testimony

Australian Dollar Forecast: Australian Dollar Looks To Trump, Xi In Argentina, RBA Policy Meet

Oil Forecast: Crude Books Worst Month in 10yrs, Outlook Turns Dour Pre-OPEC, G20

Canadian Dollar Forecast: CAD Bracing for Volatility: BoC Hold, Jobs Report, OPEC Oil Cuts?

British Pound Forecast: Current Brexit Deal Won't Pass Through UK Parliament

US Dollar Forecast: US Dollar May Rise on Economic Data Flow, Powell Testimony

Gold Forecast: Dovish Fed and US-China Deal Needed for Topside Breakout

--- 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

News & Analysis at your fingertips.