(09 JULY 2019)DAILY MARKET BRIEF 2:EUR downside momentum persists

(09 JULY 2019)DAILY MARKET BRIEF 2:EUR downside momentum persists

10 July 2019, 02:53
Jiming Huang
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Financial markets tend to favor the greenback following the recent release of strong US job data. There is therefore little upside potential for the single currency as market participants are waiting for Fed Governor Jerome Powell testimony on Capitol Hill, which should confirm that the Federal Reserve will remain patient on cutting interest rates, thus putting additional pressures on EUR. The release of Eurozone’s largest economy output and trade data also had a limited impact on the currency as investors expect the ECB to implement a significant reduction in interest rates as well as potential new quantitative easing measures.

EUR weakness is likely to sustain as the single market fundamentals remain on a downward trend. Despite an uptick in German production of 0.30% in May compared to prior month, hope of a gradual return to normal is questionable as the recent increase follows a major slump of -2%, a level not seen since August 2014. Similarly, the rise in May month-on-month exports to 1.10% (prior: -3.70%) is also more of a counterbalance, as the weakness of production orders is still being felt, pointing to a slight shrinkage of 2Q GDP. Under current circumstances, EUR is likely to remain under pressure, as the US is likely to slap tariffs on the EU by the end of this summer while the ECB will be launching a new series of targeted long-term refinancing operations in September.

EUR/USD is currently trading at 1.1198, approaching strong support at 1.1194 (18/06/2019 low) and heading along 1.1190 short-term.


By Vincent Mivelaz


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