Main euro forecast: neutral
- There are few signs that the eurozone economy is slowing down, but the European Central Bank seems determined to maintain its current bad stance.
- This refers to at least a Euro perspective, this EUR / USD is relatively stable in the coming week and this trade may be more productive than outbound transactions
Range trading opportunities in euros
The eurozone economy continues to perform well, but the European Central Bank still does not intend to tighten monetary policy; the perfect combination for a stable currency. Note that figures released at the end of July showed that the economic sentiment in the euro area rose to a record level this month, with the euro area unemployment rate falling to 7.7% in June, from a revised 8.0% in May and 7.9% better than expected. As the number of unemployed declines, there is every chance that spending in the region will rise and foreign travel will start to rise. So while some analysts worry that the slower growth rate of the mood may suggest that it is close to its peak, there is no solid evidence so far. Indeed, the biggest concern is that more travel means the further spread of the Covid-19 delta variant.
Against this background, the ECB could be expected to consider tightening monetary policy in the euro area, but this will remain firmly exhausting and is likely to tighten policy after other major central banks, such as the Federal Reserve and the Bank of England. Certainly, ECB darlings such as Jens Weidmann, President of the Bundesbank, and Pierre Wunsch, President of Belgium, are dissatisfied with this view, but they appear to be in a small minority in the Governing Council. All this points to the stability of the euro, although, of course, couples like it EUR / GBP and EUR /USD is also affected by what is happening in the United Kingdom and the United States.
EUR / USD price chart, daily schedule (April 7 – August 5, 2021)
Looking at the EUR / USD chart above, this shows that the pair has mostly traded between 1.1750 and 1.19 since the end of June. This is not good for targeted traders, but it provides an opportunity to trade in the range of the generally hemisphere during the generally low volume summer months.
Week ahead: ZEW, industrial production and trade
Focusing on the coming week, the euro area economic calendar is relatively thin, the highlight is likely to be Tuesday’s German economic sentiment ZEW index in August. Analysts surveyed by news agencies expect 58.0, which is less than 63.3, but still very positive. As for the “hard” data, Germany’s June trade figures will be released on Monday, Germany’s final inflation data for Tuesday in July, euro area industrial production on Thursday in June and euro area trade in June on Friday. None is likely to shift the foreign exchange market.
– Written by Martin Essex, Analyst Contact me on Twitter @MartinSEssex