EUR is unlikely to see an excessive long-drawn decline


There are factors that will not do EUR any favours, but several indicators do not forewarn of huge declines ahead
Chief Investment Office14 Feb 2019
Photo credit: AFP Photo


Chart used with permission from Bloomberg Finance LP, as of 14 February 2019.

 

Apart from overshooting to post a 1.1570 high around mid-January, EUR has wandered quite aimlessly since November in an approximate 1.12-1.15 consolidation range.

Nonetheless EUR has to acknowledge worsening macro conditions. Bundesbank President Jens Weidman said that European economic weakness is a “bit more protracted” than thought, and overnight indexed swap (OIS) expectations for European policy rates still show a weakening bias. Do not forget that Weidmann is a policy hawk, so not getting a rate-hike backdrop means EUR has to slip a bit here and there.

 

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