Euro Price, News and Analysis
- As I predicted here last week, there were few crumbs for the hawks on the European Central Bank’s policymaking Governing Council at last week’s meeting and EUR/USD was consequently little changed while there was even a sizable slide in EUR/GBP.
- Nonetheless, a tightening of Eurozone monetary policy is edging closer and that means any stronger than expected activity or inflation figures are more likely to boost the Euro than weaker than predicted data are to weaken it.
Euro price heading higher
With September’s meeting of the ECB’s Governing Council now behind us, Euro traders’ attention will turn increasingly to the next meeting on October 28 and, more importantly, the meeting on December 16. That’s because the December meeting in particular is now “live” in the sense that it could end with a tapering of the central bank’s support for the Eurozone economy.
As I wrote here, EUR/GBP is well placed to rally in the week ahead, with 0.86 an obvious target if Wednesday’s UK inflation data come in weaker than predicted. However, EUR/USD could also firm as the year progresses, with any stronger than forecast activity or inflation data reinforcing the view that tighter Eurozone monetary policy is on the way and any weaker than predicted numbers brushed aside as aberrations.
As the two-hour chart below shows, EUR/USD has been rising since August 20 and there is little in the way now of a further advance to around 1.19, which is not only a “round number” but also marks the highs reached a week ago – assuming, of course, that there is no sudden move into the safe-haven US Dollar should risk sentiment sour.
EUR/USD Price Chart, Two-Hour Timeframe (August 19 – September 10, 2021)
Source: IG (You can click on it for a larger image)
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The problem for this week is that there are actually very few data points for the Euro to react to; just Eurozone industrial production for July Wednesday, trade for August Thursday and final inflation for August Friday.
Nonetheless, now the ECB has revised up its target for inflation in 2022 and “recalibrated” its Pandemic Emergency Purchase Program, the most likely direction for the Euro is upwards, particularly if the ECB’s hawks continue to press for action sooner rather than later.
— Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex