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Aug 12 - 10:55 PM

EUR/USD - COMMENT-Swathe Of Factors In Play To Drive EUR/USD Range Break

By Andrew M Spencer  —  Aug 12 - 09:20 PM

EUR/USD has been in a holding pattern after gaining 4.8% in July when the risk recovery dampened haven demand for the dollar.
Investors looking for the next move need to consider several factors.

U.S. consumer prices showed a surprising jump in July nL1N2FE0MV, sending Treasury yields higher on Wednesday.
While 10-year
Bund yields have climbed 8bps to -0.447% in August, 10-year Treasury yields are up 14bps.
This change in differentials, if sustained, should be supportive of the dollar.

Containing the coronavirus is key to the economic outlook for both the euro and the dollar, and the picture is mixed here.
U.S. Federal Reserve policymakers repeated their cautious view Wednesday nL1N2FE17X, while euro zone industrial production disappointed for a second month nL8N2FE2FO.
The winner of this race should see currency strength.

and European Union trade talks have been off the market radar, but may resurface.
Negotiations remain deadlocked with the U.S. maintaining 15% tariffs on Airbus, but an escalation is likely in the autumn, when the EU is expected to win WTO approval to retaliate with tariffs on Boeing nL1N2FE2HD.
Increasing trade tensions would be perceived as dollar-positive.

Technically EUR/USD has consolidated the July gains in a 1.1695-1.1916 range in August.
Signals are mixed, but a close outside the range should be directional.

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Refinitiv IFR Research/Market Commentary


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