EUR/USD: Preparing For Another Leg Lower And Test Of Parity
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EUR/USD Next Week: – BEARISH BIAS – (1.0400-1.0900)
The surprise election of President Trump has re-energised the US dollar bull market by encouraging a further widening of expectations for monetary policy divergence between the Fed and other major central banks such as the ECB.
With significant fiscal stimulus likely on the way in the US under President Trump, the Fed will face greater pressure to tighten monetary policy more quickly to dampen building upside risks to inflation. A stronger US dollar will help to dampen inflation pressures.
The election of President Trump has also heighted concern amongst market participants over upcoming political risk events in Europe which is weighing on the euro. Opinion polls continue to show that the public could reject constitutional reforms in Italy bringing down Prime Minister Renzi’s government.
Euro weakness would accelerate if the cyclical low at 1.0458 from March 2015 is taken out before year end.
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