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Rising Treasury yields, falling stock indexes, and the Donald Trump factor are supportive Euro against the US dollar Bear. However, the bulls have their trump cards too. How will the pair react to inflation in such a situation? Let’s discuss it and make a trading plan.
Weekly fundamental forecast for the Euro
But if it weren’t for bad luck, they wouldn’t have any luck at all. Eighteen months ago, the chances of Donald Trump returning to the White House seemed slim after the Democrats’ surprisingly successful midterm elections. However, these chances jumped to more than 50% after the jury found Trump guilty on all 34 criminal charges. This allowed Euro against the US dollar The bears will have to lick the wounds caused by slower-than-expected US GDP growth in the first quarter of the year.
Classification of American candidates
Source: Bloomberg.
Donald Trump created uncertainty during his previous presidential term with his trade wars, attacks on the Federal Reserve, and arguments about the benefits and drawbacks of a strong dollar. This increased investor fears and strengthened the dollar as a safe haven currency. A similar atmosphere could return to Forex if the Republican wins the November election. It is not surprising that Euro against the US dollar It took a step back after rapid growth amid information that US GDP slowed by 1.3% in the January-March period.
The US economy is slowing due to rising interest rates and declining income growth. However, while New York Fed President John Williams and Atlanta Fed President Raphael Bostic believe current policy is sufficient to slow inflation to 2%, their Dallas counterpart Lori Logan calls it not restrictive enough. This speech does not rule out the possibility of raising the federal funds rate.
I would like to know how Donald Trump would react to this idea. Bloomberg experts say that the US presidential election factor is the second most important risk to the euro zone economy after inflation. They expect six deposit rate cuts from the ECB over the next 18 months, which is less monetary expansion than in the previous poll.
The risks facing the European economy
Source: Bloomberg.
Expectations of the timing of the European Central Bank’s monetary expansion
Source: Bloomberg.
The euro was supported by accelerating inflation in May in Germany and Spain, two of the four largest economies in the eurozone. This reduces the chances of the ECB easing monetary policy in July after its first move in June. However, we will draw final conclusions after the release of European consumer price statistics.
Its acceleration in May amid a slowdown in the US personal consumer spending index, the Fed’s preferred indicator of inflation, could set the stage for bullish attacks on the dollar. Euro against the US dollar. The main obstacle to the growth of the major currency pair in the short term is the unfavorable background of rising Treasury yields and falling stock indices. The Trump factor also helps the US dollar.
Weekly trading plan for EURUSD
Important releases of European and US inflation data could create a storm in a teacup, but are unlikely to determine its fate Euro against the US dollarMore direction. The pair may go on a choppy ride, with subsequent consolidation between 1.079 and 1.086.
EUR/USD price chart in real time mode
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