The battle for interest rate support in currency markets continues. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes EUR/USD outlook.
ECB talk of tightening is both very unlikely and a bad idea
The FX market’s strong focus on monetary policy, and the common refrain from major central banks that they think markets are pricing in rate cuts too soon, has helped EUR/USD meander around dispute a yawning growth divide.
If we were to see talk of a Fed rate hike (which is not in our forecasts at all) EUR/USD would fall.
The lack of growth in Europe means that ECB talk of tightening is both very unlikely and a bad idea.
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