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Euro Forecast: EUR/USD Outlook Murky Ahead of Crucial EU Summit

Euro Forecast: EUR/USD Outlook Murky Ahead of Crucial EU Summit

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Fundamental Euro Forecast: Neutral

  • Traders in EUR/USD, and especially EUR/GBP, will need to keep a close eye this week on the two-day European Council meeting that starts Thursday in Brussels.
  • If the EU leaders attending are optimistic on the EU-UK relationship after Brexit, that should weaken EUR/GBP and potentially weaken EUR/USD too.

Euro price outlook dependent on EU summit

Trading in the Euro will likely be subdued this coming week ahead of the crucial two-day meeting of EU leaders in Brussels that starts Thursday. The European Council agenda is topped by the Covid-19 pandemic, followed by EU-UK relations after the post-Brexit transition period ends on December 31, and both have the potential to move the Euro.

The coronavirus discussion could be important for EUR/USD and EUR/GBP if there are hints of more fiscal stimulus to come – potentially a positive for the Euro. However, traders will likely concentrate on the talks about the future EU-UK relationship, with any signs of a deal – however basic – likely to weaken EUR/GBP and potentially EUR/USD too.

EUR/USD Price Chart, Daily Timeframe (July 8 – October 8, 2020)

EUR USD Price Chart Euro Forecast EURUSD

Source: Refinitiv (You can click on it for a larger image)

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“The European Council will take stock of the implementation of the withdrawal agreement and review the state of the negotiations on the future EU-UK partnership. Leaders will discuss preparatory work for all scenarios after 1 January 2021,” according to the summit agenda.

German ZEW, inflation on the calendar

Away from the summit, the week’s economic data are not likely to have an impact. The most important number on the calendar is Tuesday’s ZEW economic sentiment index for Germany in October, which has been rising steadily since March. Inflation figures for Germany, France and the Eurozone as a whole are also due over the course of the week.

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--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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