EUR/USD: We don’t expect dollar weakness to extend further - MUFG

Currency Analyst at BTMU Lee Hardman, explains that they do not expect US dollar weakness to extend further in the near-term. They see the EUR/USD  pair with a neutral bias to move between 1.0900 and 1.1250.

Key Quotes:

“The euro has staged a modest rebound against the US dollar following the release of the latest FOMC statement which has helped keep the pair above the 1.1000-level. We do not expect US dollar weakness to extend further in the near-term which is mainly driven by positioning and technical factors.”

“The FOMC statement did not provide fundamental justification for a more sustained US dollar sell off. The statement was even more hawkish than our own expectations including an upgrade to the Fed’s assessment of the US economy and highlighting that they now judge near-term risks to have diminished.”

“The Q2 GDP report is expected to reveal that the US economy rebounded solidly after the weak start to the year. The latest Employment Cost Index will also be watched closely for further evidence of building inflation pressures. Fed speakers including Vice Chair Dudley could provide greater clarity over the potential timing of the next rate hike. In Europe, the main focus is likely to be on the health of the banking system following the latest stress test results.”

“A further loss of investor confidence in European banks would increase downside risks for the euro-zone economy and the euro in the year ahead.”