EUR/USD outlook: Euro strong across the board
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📍 Notably, the euro was also higher on the month against nearly all her major rivals, including the GBP, JPY and CAD, as well as the antipodean and Scandinavian currencies. The EUR/GBP was on course to finish higher for the second month, while the EUR/JPY had crossed the 160.00 handle for the first time since August 2008 following the BoJ’s slight tweak of its policy overnight in a decision that left markets disappointed. The only exception has been the EUR/CHF, which was still negative on the month at the time of writing. But even this FX cross has been showing relative strength in the last couple of weeks.
📍 One reason why the Fed is unlikely to raise rates again is the recent rise in long-term bond yields, which effectively is equivalent to a couple of additional rate hikes. This is all in the price. Forward-looking investors are perhaps thinking that if interest rates stay high, the eventual rate-cutting cycle that will inevitably follow will be more pronounced than would otherwise be the case. That may explain why the EUR/USD is showing some signs of life.
📍 But let’s not get too ahead of ourselves yet and a lot can change both in the Eurozone and the US in the next couple of months. Let’s see whether and how the trend of the US data will evolve, starting with the monthly jobs report that is due on the economic calendar for Friday.
📍 One reason why the Fed is unlikely to raise rates again is the recent rise in long-term bond yields, which effectively is equivalent to a couple of additional rate hikes. This is all in the price. Forward-looking investors are perhaps thinking that if interest rates stay high, the eventual rate-cutting cycle that will inevitably follow will be more pronounced than would otherwise be the case. That may explain why the EUR/USD is showing some signs of life.
📍 But let’s not get too ahead of ourselves yet and a lot can change both in the Eurozone and the US in the next couple of months. Let’s see whether and how the trend of the US data will evolve, starting with the monthly jobs report that is due on the economic calendar for Friday.
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