EUR/USD: Neutral Outlook, Risks Becoming More Balanced - MUFG
Analysts from The Bank of Tokyo-Mitsubishi UFJ, a cautious Federal
Reserve may encourage one last leg lower for the US dollar but risks
becoming more balanced in the EUR/USD pair. They expect it to trade neutral between 1.1200 - 1.1500 during the next week.
Key Quotes:
“The
euro continues to remain relatively stable against the US dollar in the
near-term. The Fed’s reluctance to signal more strongly that it may
resume rate hikes at their next meeting in June is likely to keep the US
dollar on a softer footing in the nearterm.”
“The Fed remains
cautious about resuming rate hikes in light of the slowdown in growth in
Q1. It will require building evidence that the US economy is rebounding
in the coming months to increase Fed rate hike expectations and offer
more support for the US dollar. On the other hand, the FOMC statement
was less dovish than in March bringing an end to the run of two
consecutive meetings when the Fed had become progressively more
cautious.
“ As a result, the Fed statement provides only a weak trigger for further US dollar weakness. The US dollar has already weakened sharply and is more likely moving closer to reaching a bottom in the near-term.”
“EUR/USD remains primarily driven by the US dollar leg. Brexit risk has eased over the past week although so far has had little to no impact on the euro’s performance more broadly.”