Top Trade Idea 2020: Short EUR/USD - Euro May Crumble as Dovish ECB, Political Risks Weigh

The Euro faces a challenging path forward in 2020. Regional economic growth remains at near-standstill, all but assuring a durably dovish ECB. The seeming certainty of Brexit after the UK general election means a trade deal between London and Brussels must now be painstakingly negotiated, making for elevated sensitivity to headline risk. The US may be emboldened to escalate cross-Atlantic trade tensions after the Trump administration managed to badger Canada, Mexico and China into accepting at least some of the realignment in cross-border commerce that it wanted.

The broader backdrop is cautiously optimistic in the meanwhile, at least in relative terms. The global economy continues to grow despite a dramatic slowdown from early 2018 peaks, and some of the landmines peppering the political landscape have been defused by greater certainty about the EU-UK and US-China relations. A spirited recovery seems unlikely as a new source of angst – the US presidential election – enters the spotlight, but that is probably more of a dampener on activity than an outright recession trigger.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter