EUR/USD Daily Fundamental Forecast – January 18, 2017

It was all about the pound and the dollar yesterday as the pound strengthened across the board and the dollar weakened all across the board as well. This combination rubbed off on the euro as well and helped to give a much needed boost to the euro as the pair finally broke through the 1.0600 region and managed to reach above 1.0700 where it traded for a brief while. The pair now trades just below that as of this writing but it looks good for more.

With the UK PM May making is clear that they are headed for a full and clean exit from the Eurozone, the global fears and risks seem to recede somewhat and this saw the pullout of the funds from the dollar, which is considered as a safe haven in times of risk, and pushing of these funds into more risky areas like the stock markets. This helped to weaken the USD and the fact that there is some more clarity in the Brexit process is something good for the eurozone as well. If there is one thing that the market hates, it is uncertainty and so once things become more and more clear, even if the clarity points to something bad, the markets tend to like it and they begin to price in that clarity and this is what we saw yesterday. Though the full Brexit could affect the trade in the eurozone, the fact that there is some clarity in the process helped to calm the minds of the investors and hence we saw the upsurge in the EURUSD pair which is likely to continue till the 1.0850 region.

Looking ahead to today, there is not major economic news from the eurozone but we have the CPI and Core CPI data from the US towards the NY session which will be watched closely by the market as good data is paramount for the Fed to continue to hike rates in the near future.