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- EUR/USD upside is constrained – Westpac
EUR/USD upside is constrained – Westpac
Richard Franulovich, the head of FX strategy at Westpac, notes that the latest escalation in trade tensions has short-circuited what appeared to a notable breakdown in EUR/USD through key supports.
- “EUR//USD downside has been a tough slog for some time, the region’s record strong basic balance surplus arguably a key factor containing meaningful downside.
- But even as EUR/USD may have dodged a bullet, the upside is constrained.
- The region’s growth engine continues to sputter; the 1.5% slump in German IP in June underscoring yet further weakening momentum. That, resurgent trade tensions and Brexit will add further pressure on ECB President Draghi to act decisively in September.
- Concerns about a lack of ECB policy space are overdone, their Sep 12 meeting likely to feature rate cuts (and mitigating measures such tiering), a restart of QE and another extension of forward guidance.
- EUR rebounds into 1.13/1.14 likely to stall.”
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