EUR: Not worth chasing it higher for now
EUR/USD was meant to be primarily a dollar story in the latter part of this week and the pair is finding some support due to the soft-ish USD momentum, despite strong US data. As highlighted above, we see a dollar comeback as likely, so we would be reluctant to chase a EUR/USD much beyond 1.0900. The current set of market conditions would suggest 1.0750/1.0800 to be a more appropriate trading range.
The eurozone calendar remains uninspiring from a data standpoint but there are some ECB speakers to monitor today. President Christine Lagarde will participate in a panel although it is unclear whether she will discuss monetary policy, and we’ll also hear from Guindos, Stournaras and Nagel.
In the UK, the Bank of England published a survey of corporate pricing plans yesterday, which included some encouraging news for lower inflation. Our UK economist discusses in this article how Bank of England members – and markets – are losing confidence in these forward-looking indicators and at least two more 25bp hikes are on the cards. Still, the inflation picture should improve later this year, which means some pricing out of BoE rate expectations can come hitting the pound down the road. For now, it remains hard to see a sustained GBP downtrend.
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