EUR/USD Price Forecast – Trade News Provides Early Support

EURUSD Monday

The EURUSD pair was up 0.14% to $1.13469 at the time of writing, following on from last week’s 0.35% gain.

In the wake of last week’s respective monetary policy meeting minutes and a mixed slew of data through the 2^nd half of the week, there’s been little direction for the pairing.

Economic data out of the Eurozone remains on the weaker side but has yet to cause the ECB to shift on its current policy stance. There’s, therefore, possible upside for the EUR should another set of weak stats come out of the U.S this week, which could narrow the monetary policy divergence further.

EURUSD Finds Support as Optimism over a Trade Deal Rises

Gains through the early part of this morning came off the back of Trump’s Tweeter account. Over the weekend, the U.S President tweeted of significant progress being made in trade talks. While few were expecting an agreement to be wrapped up ahead of the 1^st March deadline, an extension to the deadline would have been a bare minimum needed to support risk sentiment and ultimately the EUR.

It could be a double-edged sword for the EUR, however. Once Trump successfully moves on from trade negotiations with China, Europe, and the EU’s auto sector would most likely be next on the hit list.

Germany’s manufacturing sector has been in contraction since December and Italy’s since October. U.S tariffs on European car manufacturers would likely be particularly punitive for the EUR. This is likely to be a contributory factor to the limited upside seen in the EUR of late.

There is no economic data scheduled for release today. Early support for the EUR will likely continue, barring a material shift in risk sentiment through the day.

The unpredictability of the Oval Office will need to be considered over the course of the day, however. There is no timeline to Trump’s plans to begin assessing current trade terms with the EU. More significantly, talk of tariffs could come at any time. The U.S is Germany’s largest export market for motor vehicles. So, there’s plenty of reason for the EUR to react to any threat from the U.S, which could come at any time.

In Summary,

There is early support for the EUR:

• As markets respond to trade news from the U.S President.
• A narrowing in monetary policy divergence, stemming from the FED’s balance sheet uncertainty.
• In spite of a more dovish ECB, the EUR’s downside is limited.  $1.13 levels supported near-term.

Downside Risk:

• The ever-persistent threat of tariffs on the EU auto sector continues to limit the EUR’s upside near-term.
• Any U.S administration commentary on trade with the EU will pressure the EUR. A downward trajectory through $1.12 levels to be expected in such an event.