EUR/USD Fundamental Analysis – week of January 16, 2017

The EURUSD finished higher for the week which was a bit of a surprise as most of the traders had expected the dollar strength to begin to prevail in the market as the liquidity picked up after the beginning of the new year. The dollar has all the fundamentals going for it with 2 or 3 rate hikes expected from the Fed this year but geopolitical tension and risks helped to keep a lid on the dollar strength and this helped the euro to gain ground over the dollar during the course of the week.

This was helped greatly by the fact that we had Trump speaking in his first press conference since July and a lot was expected from this conference but it turned out to be a damp squib with Trump showing that he has not changed much since his victory. There was no vision or a stateman like behavior and what we saw was more about protecting himself, his business and his image than spelling out anything about future foreign, fiscal or economic policy. This disappointed the markets and was one of the main reasons for the dollar to fall further. The market believes that Trump is likely to pose a threat to the dollar in future with his uncertain methods and this could affect large trade deals and could weaken the American economy.

The coming week is a bit light on the data as far as the US is concerned with a speech by Yellen and the CPI data being the most important ones for the week. But we do have the ECB rate declaration and the press conference that will follow soon after. There is unlikely to be any changes to the rates in the eurozone and with the ECB making it clear that the QE is likely to run till the end of this year atleast, there is unlikely to be any major surprises in the press conference as well.