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If Europe avoids a trade war with China, France adheres to the EU Stability and Growth Pact, and the US economy continues to slow, the worst times will be over for the United States. Euro against the US dollar Husband. Let’s discuss this topic and make a trading plan.
Weekly fundamental forecast for the Euro
The market is tired of selling the Euro, as are France and the Euroskeptics. The market no longer fears China’s retaliation against the tariffs announced by the European Union on imports of electric cars. Given the increasing possibility of the imminent start of the Fed’s monetary policy easing cycle, investors are ready to dump the US dollar. EUR/USD sales fatigue explains the major currency pair’s recovery from two-month lows. Will the bulls have enough strength to maintain the growth momentum?
China offered Germany the option of reducing customs duties on imports of large motor vehicles from 15% to zero in exchange for the European Union canceling new customs duties on imports of electric vehicles from China. Before that, there were rumors in the market about a full-scale trade war. In response to the increase in European tariffs to 48%, China intends to increase its own tariffs from 15% to 25%. The main victim will be the German automobile industry. The worst can be avoided, and Euro against the US dollar The husband took advantage of the situation.
The National Rally, which is leading in the opinion polls, has given the euro a helping hand with its conciliatory rhetoric. It appeals for calm and does not understand why Finance Minister Bruno Le Maire and President Emmanuel Macron alarm the markets with statements about the crisis and civil war. The right wing intends to respect the deficit reduction path to keep France within the parameters of the Stability Pact.
Party popularity rating in France
Source: Bloomberg.
Such rhetoric reassures investors who fear that the rise to power of Marine Le Pen and her supporters will increase the already ballooning budget deficit and public debt, which reach 5.5% and 111% of GDP, respectively. This could potentially increase the yield spread between French and German bonds by up to 100 basis points. The greater the political risk, the more likely it is to occur Euro against the US dollar It will decrease.
Franco-German bond yield spread
Source: Bloomberg.
In contrast to the euro, which is shaking off its concerns about trade wars and the crisis in France, the US dollar, on the contrary, remembers its weaknesses. According to San Francisco Federal Reserve Bank President Mary Daly, all is going well in the market, as unemployment has been slowly rising. However, the indicator is approaching an inflection point, after which it could rise quickly. So high inflation is not the only problem facing the Fed.
The official hints that a cut in the federal funds rate would mitigate a potentially rapid slowdown in the labor market. Her German counterpart, Isabelle Schnabel, says that the difference in monetary policy between the European Central Bank and the Federal Reserve is not significant and is temporary in nature.
Weekly trading plan for EURUSD
The euro’s black streak may now be over. However, in order to grow steadily, the major currency pair needs the US economy to continue to slow. Now, sell trades can be opened if… Euro against the US dollar The pair returns below 1.0735.
EURUSD price chart in real time mode
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