MUFG Research discusses EUR/USD tactical outlook and maintains a neutral bias, expecting the pair to stay in 1.12-1.15 range for now.
"We expect the euro to continue to trade within the narrow 1.1200 to 1.1500 range against the US dollar. The release of the euro-zone GDP data for Q4 will be scrutinised for further evidence of slowing growth momentum in the euro-zone. Brexit votes in the UK parliament in the week ahead could have some impact on the euro. If amendments are passed which would allow parliament to force the government to request an extension of Article 50, the euro could find some support from a further reduction in “No Deal” Brexit risk," MUFG notes.
"In the US, the ongoing government shutdown is both clouding the US economic outlook in the near-term and increasing downside risks to growth. The Fed is scheduled to meet amidst the uncertainty. We expect the Fed to reiterate that they have paused their rate hike cycle to allow more time to assess the outlook. It should continue to put a dampener on US dollar strength at the start of this year," MUFG adds.