EUR/USD: Into One Of The 'Quietest' Periods Of The Year; Neutral Bias & Narrow Range
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EUR/USD – NEUTRAL BIAS – (1.1000-1.1300)
The decision of the BoE to act aggressively at today’s MPC meeting through a combination of a rate cut and balance sheet expansion measures serves as a timely reminder that even though the US dollar has come under selling pressure this week due to weak economy concerns and speculation of delayed Fed action, there is only so far the dollar will fall when you have a large number of other central banks implementing monetary easing. It was the BoJ last week, the RBA and BoE this week, the RBNZ probably next week and many expect the ECB to follow in September with at least an extension of the timeline of QE beyond March 2017.
Clearly though, with the actions of other central banks, a mere extension of QE will probably not be enough to have much influence on the euro, so we do not expect the euro to come under selling pressure over the short-term given central bank action elsewhere.
We are now entering one of the quietest periods of the year, so we have a neutral bias and expect a relatively narrow trading range. In what looks like being a quiet week in terms of economic data and central bank speakers in both the eurozone and the US, the performance of European banking stocks may continue to get attention. We do not expect any major FX influence stemming from banking sector concerns over the short-term.
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