EUR//USD: Upside is constrained – Westpac

According to Richard Franulovich, head of FX strategy at Westpac, latest escalation in trade tensions has short-circuited what appeared to a notable breakdown in EUR/USD through key supports.

Key Quotes

“EUR//USD downside has been a tough slog for some time, the region’s record strong basic balance surplus arguably a key factor containing meaningful downside.”

“But even as EUR/USD may have dodged a bullet, the upside is constrained.”

“The region’s growth engine continues to sputter; the 1.5% slump in German IP in June underscoring yet further weakening momentum. That, resurgent trade tensions and Brexit will add further pressure on ECB President Draghi to act decisively in September.”

“Concerns about a lack of ECB policy space are overdone, their Sep 12 meeting likely to feature rate cuts (and mitigating measures such tiering), a restart of QE and another extension of forward guidance.”

“EUR rebounds into 1.13/1.14 likely to stall.”