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EUR/USD – BEARISH BIAS – (1.0800-1.1200)
The message from Draghi today was as expected – we need more time to assess the economic data in the aftermath of recent events like Brexit and the attempted coup in Turkey. By the next meeting on 8th September, the outlook will be a little clearer and the ECB will have the updated staff forecasts to make a more informed decision.
That message certainly leaves the door open for action at that meeting although there was no strong or explicit signal about action by then. But certainly the general tone of his statement and comments point to the ECB still being concerned about downside risks to inflation.
For the week ahead, the advance PMIs tomorrow might give some indication of the hit to business confidence post-Brexit when markets in Europe fell sharply. The risks to those reports seem to be to the downside.
Next week, the key event is the FOMC announcement on 27th July. Given the general flow of economic data, the statement from the FOMC is likely to be more optimistic about the outlook which could fuel further upward pressure on short-term yields in the US, thus providing some modest support for the dollar.
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