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EURUSD Looks To Bundesbank's Weidmann For Hawkish Boost

EURUSD Looks To Bundesbank's Weidmann For Hawkish Boost

2018-04-12 10:00:00
Nick Cawley, Strategist
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EURUSD News and Talking Points

- Bundesbank President Jens Weidmann speech about the euro-zone currency union may well spark a bid for the single currency.

- EURUSD may be the best pair for euro bulls if US President Trump keeps to his word on Syria.

The DailyFX Q2 Trading Forecasts for all major currencies, commodities and indices, are now availableto download to help you make more informed trading decisions.

ECB Hawkish Rhetoric May Add Fuel to EURUSD Rally

The recent move higher in EURUSD may well continue over the next couple of days if Bundesbank President Jens Weidmann keeps to his well-documented hawkish stance when he speaks later in the session on the euro-zone currency union. Weidmann, a well-known critic of the ECB’s loose monetary policy, may re-iterate, directly or indirectly, the need for the central bank to change monetary tack and end the zone’s EUR30 billion a month bond buying program at the end of September, leaving room for rates to rise sooner rather than later in 2019.

Ahead of Weidmann’s speech at 16:00 GMT, the minutes of the latest ECB March Policy Meeting will be published at 11:30 GMT. The minutes are expected to confirm the central bank’s intention to tighten policy but no details of timing are anticpated.

Another ECB policy maker, Austria’s Ewald Nowotny, said on Monday that the ECB should move its deposit rate higher – from -0.40% to -0.20% - ahead of a hike of its main interest rate. This stance would resonate with Weidmann who has long argued that German savers are being disadvantaged by negative rates in Europe. Nowotny was quickly shut down by the ECB who said that his views were his own and did not represent the views of the Governing Council. German government bonds continue to trade with a negative interest rate out to 5-years with the closely followed 2-year quoted at -0.55%.

EURUSD may also benefit from USD weakness if US President Donald Trump sticks to his recent tweets and launches a missile attack on Syria in response to the alleged chemical attack near Damascus. With Syria’s ally Russia vowing to shoot down any US missiles over Syria, any escalation of military action between the US and Russia will weigh on the greenback.

The latest IG Client Sentiment Indicator also adds weight to a further rise in EURUSD with retail traders’ short-to-long ratio currently standing at 1.8 to 1, with shorts increasing and longs decreasing over the last week.

EURUSD Price Chart Four Hour Timeframe (March 12 – April 12, 2018)

EURUSD Looks To Bundesbank's Weidmann For Hawkish Boost

Chart by IG

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on EURUSD? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

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

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