Even though the Euro Dollar pair has been falling for more than six months, there are few indications yet that its trend lower is about to reverse. It was relatively stable last week, either side of its spike lower Tuesday when US Federal Reserve Chair Jay Powell said the Fed was thinking of ending its asset buying earlier than previously planned, but an extended rally is not on the cards unless the European Central Bank has a rethink too.
Until, the ECB, and particularly President Christine Lagarde, have been unwavering that Eurozone inflation will be temporary and that there is therefore no need for tighter monetary policy. It would therefore take a notable course change – and loss of credibility – for it to switch from dovish to hawkish; and that means further losses for EURUSD, particularly now Powell no longer sees US inflation as temporary.
Net week, the schedule is light, with the highlights likely to be the released-on Tuesday of the latest ZEW economic sentiment index for Germany. Then, the only numbers of note are German industrial production and trade figures for October, final German inflation numbers for November and the third estimate of Eurozone third-quarter GDP – none of which should affect the currency.
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