Fundamental Forecast for EUR/USD: Neutral
- The Euro[1] may have established a near-term low against many major currencies as bottoming efforts have emerged in the week after the European Central Bank’s dovish June rate decision.
- ECB President Draghi pledged to be “patient” on tightening monetary policy, so traders have started to weigh more heavily data that will directly impact the timeline of rate hikes.
- The IG Client Sentiment Index[2] suggests a neutral outlook for EUR/USD[3], but retail traders have started to increase their net-long positioning.
See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides[4].
The Euro was one of the top performing major currencies last week, gaining ground across the board save for against the Japanese Yen[5] and the Swiss Franc[6]. Despite the European Central Bank’s continued efforts to lay the groundwork for the next year-plus of monetary policy, President Draghi pledged to be “patient” on tightening monetary policy, so traders have started to weigh more heavily data that will directly impact the timeline of rate hikes.
Front and center in the coming week will be the preliminary June inflation reports for Germany and the broader Eurozone. Price pressures are expected to continue their rebound, with headline Eurozone CPI due in at +2% y/y. For context, with the Euro trade-weighted index up by only +3% over the past year, meaning that the currency itself is now proving to be less of a drag on inflation than it was back in April (when the trade-weighted index was up by +9% over the past year).
The inflation figures
