EUR/USD: Risks on to the downside – Danske Bank

EUR/USD was under pressure yesterday following somewhat weak German regional inflation figures and the Fed’s Powell coming across slightly on the hawkish side during the Q&A in the US House after a reasonably balanced introductory statement, points out Chief Analyst, Allan von Mehren at Danske Bank.

Key Quotes

“Markets had become somewhat complacent regarding the Fed response to the US economy running on all engines, including the fiscal one, and the correction in Fed pricing and USD was warranted, in our view. Today, focus is likely to be on digesting Powell and on eurozone inflation figures; we still see risks on EUR/USD to the downside going into this weekend’s political events in the eurozone.”

“EUR/GBP fell back below 0.88 yesterday on the back of USD appreciation, wh ich hit the EUR relatively hard and M&A-related news. We look for the 0.8770-0.8925 range to hold in the short term with risks skewed to the downside ahead of Theresa May’s speech on Friday.”