EUR/USD signals further consolidation ahead – Danske Bank

Analyst at Danske Bank Mathias Mogensen believes further decline in spot has lost traction.

Key Quotes

“EUR/USD edged higher yesterday after hawkish comments from ECB’s Praet and Draghi that cyclical weakness should not derail the ‘exit’ process. Indeed, some fatigue in majors remains with respect to the trade issue, which leaves room for central banks as drivers”.

“While we are awaiting minutes from both Fed and ECB later in the week, note that long-term yield and inflation differentials and thus the EU-US real-rate spread remain key drivers of EUR/USD. The latter has been under continued pressure recently (even if a drop in euro-zone inflation expectations moderated this somewhat)”.

“Alongside stretched USD short positioning, this points to some suppressed EUR/USD downside near term”.