26 Jun 2014
EUR/USD could return to the downside path – Danske Bank
FXStreet (Edinburgh) - Divergent policies in t he US and the euro bloc would be supportive of the greenback, noted Pernille Nielsen, Analyst at Danske Bank.
Key Quotes
“EUR/USD traded higher yesterday on the back of weaker-than-expected US data where Q1 GDP growth was revised down considerably to -2.9% from -1.0% and where durable goods orders overall came out on the soft side”.
“As highlighted in the latest IMM update, speculative positioning in EUR/USD has become increasingly stretched over past weeks, making the cross vulnerable to negative surprises. In our view, this largely explains the relatively big market reaction yesterday”.
“All in all, the labour market is pretty healthy and all forward-looking indicators still point to acceleration in consumption, capex and housing, supporting the case for a continuation of Fed tapering and a trend lower in EUR/USD driven by divergent monetary policy between the EU and US”.
“At the end of the day, labour market and inflation is what matters for the Fed and today’s data for initial jobless claims is likely to confirm a robust labour market while the US PCE core inflation is expected to increase, indicating that inflation probably has bottomed out in the US”.
“This should be positive for the US dollar”.
Key Quotes
“EUR/USD traded higher yesterday on the back of weaker-than-expected US data where Q1 GDP growth was revised down considerably to -2.9% from -1.0% and where durable goods orders overall came out on the soft side”.
“As highlighted in the latest IMM update, speculative positioning in EUR/USD has become increasingly stretched over past weeks, making the cross vulnerable to negative surprises. In our view, this largely explains the relatively big market reaction yesterday”.
“All in all, the labour market is pretty healthy and all forward-looking indicators still point to acceleration in consumption, capex and housing, supporting the case for a continuation of Fed tapering and a trend lower in EUR/USD driven by divergent monetary policy between the EU and US”.
“At the end of the day, labour market and inflation is what matters for the Fed and today’s data for initial jobless claims is likely to confirm a robust labour market while the US PCE core inflation is expected to increase, indicating that inflation probably has bottomed out in the US”.
“This should be positive for the US dollar”.