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Aug 29 - 02:36 PM
EUR/USD - COMMENT-Lagarde, US-China Risks Conspire Against EUR/USD
First appeared on eFXplus on Aug 29 - 11:00 AM

EUR/USD bears took another step toward greater control as the outlook for the ECB and U.S.-China relations paved the way for losses.
Germany's HICP slowed again and came in below both month-on-month and year-on-year estimates nL5N25P47P.
The downside surprise led Euribor FEIX9 to factor in greater chances of ECB cuts ECBWATCH, which were also bolstered by comments from Christine Lagarde to the EU Parliament Committee on Economic and Monetary Affairs.
Lagarde said she does not believe the ECB has hit the effective lower bound on policy rates. Click here

Her comment also helped keep German bond yields DE2YT=RR near recent lows.
German-U.S.
spreads widened on the inflation data and Lagarde, which drove EUR/USD towards 1.1050.
The perceived easing of U.S.-Sino trade tensions nL3N25P29K weighed down EUR/USD as well.
China's yuan weakened significantly when trade tensions escalated recently.
USD/CNH rallied sharply and dragged EUR/CNH, which EUR/USD is currently correlated to , along for the ride.
The yuan rallied sharply today as tensions eased slightly.
EUR/CNH hit a 5-day low as it fell towards 7.8950.
A further de-escalation of trade tensions should result in additional yuan strength, which should send EUR/CNH significantly lower and take EUR/USD lower with it.
EUR/USD shorts could see the 1.1000 barrier break and 1.0850/1.0900 support tested.

chart: Click here

chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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