EUR/USD Daily Fundamental Forecast – January 12, 2018

The EURUSD got a boost from the ECB minutes that were released yesterday and probably for the first time in the last month or so, we are seeing the pair being driven by the euro rather than the dollar. The dollar has been steady during the course of the week and it continues to be so all across the markets but what has been driving the euro are the fundamentals associated with it.

EURUSD Pushes Through 1.20

This is a marked change from the earlier weeks when the move higher was driven more by the fall in the strength of the dollar than an increase in the strength of the euro. The ECB pointed to the improving economic data and the economic situation in the Eurozone and hence this pointed to the possibility of a gradual shift in the policy. Though this is something that is already known in the markets and interpreted as such by the markets, this is the first time that a gradual shift in policy is being discussed at an ECB meeting.

This is a boost for the euro as it means that it is likely that they would end QE by the end of the year and could also be looking at increasing the deposit rates by this year. This hawkishness from the ECB minutes has helped the pair to push through 1.20 and it now trades just below the 1.2050 region as of this writing and it is looking to threaten the range highs once again.

Looking ahead to the rest of the day, we do not have any major news from the Eurozone but we have the inflation and the retail sales data from the US later in the day. This is the largest and most important piece of economic data from the US after the employment report and hence, this should bring in a lot of volatility. If this comes out weaker, then there is a possibility that the anticipated rate hike from the Fed could be delayed and this could be the trigger that the euro needs t break through 1.21.