Monday, July 23, 2018

Euro rallies as Dollar takes more blows from Donald Trump, fresh data on the docket

  • Dollar
  • Euro
  • Pound
  • Stocks


The Euro rallies to 1.1750 this morning ahead of a week full of important Eurozone data and the ECB interest rate decision on Thursday. The shared currency is enjoying a strong 150 pips rally on the back of Dollar's weakness that has Donald Trump to blame for its losses. The US President didn't just criticize the Fed for raising interest rates too fast for his taste but on Friday he also took a swing against China and the EU for “manipulating” their currencies lower.

Starting our review with the Euro, the Single currency has been on a positive trajectory for the past 2 days but with a number of key reports ahead of us and the ECB monthly meeting due this week the price action will hinge on fresh stimulus. The Eurozone Consumer Confidence data today, the EZ Manufacturing and Services PMIs tomorrow and the IFO figures on Wednesday will act as appetizers ahead of the ECB meeting later in the week. Expectations are set for a round of mildly weaker data so Euro's rally will likely stall after hitting the 1.1750 highs and wait to get fresh direction from Draghi's remarks.

On the other hand, the Dollar has little to trade on especially at the start of the week with the July Services and Manufacturing PMIs being the only noteworthy piece of data set for Tuesday. As such, Dollar's price action will take its cue from Trump's remarks and given his clear preference for a weaker currency we could see a bearish tone for the greenback. At the same time, the rally in the 10-year Treasuries which was not reflected on the shorter term notes is suggesting that investors are growing concerned about the prospects of US inflation which could eventually affect the Fed's rate hiking path.

The Pound is set to have a quiet start of the week with no significant UK-related reports on the docket for the first 72 hours of trading. Given the lack of any important Brexit-related battles in the Parliament it seems that Cable will trade on the back of Dollar's action. The current weakness seen in the greenback suggests that Sterling has the chance to continue pushing higher with the 1.32 area being the near-term target.

Commodities are on diverging trajectories at the start of the week with Gold testing its 200-period moving average around the $1,234 area this morning while Oil trades around $68. The yellow metal is benefiting from Dollar's downbeat bias and, if this is to continue, Gold has more room to rally. The next area of focus is located around the $1,238 level and more Dollar weakness can help prices climb towards this area today.

Equities ended the week in a mixed manner and this morning the Asian markets are trading with a moderately bearish tone. The European and US futures are indicating a muted opening as Trump's remarks that China and the EU are manipulating their currencies create a less than comfortable trading environment. On the earnings' calendar, Google's parent company Alphabet is expected to release its results today after the market close and with more heavyweights due to release this week the focus will likely be on corporate results rather than trade war news.


  • Euro-Zone Consumer Confidence - 6pm

All times are GMT +4.