EURUSD Daily Fundamental Forecast – November 16, 2017

EURUSD Thursday

The EURUSD pair was flat at the time of writing, with the markets looking ahead to today’s finalized October inflation figures out of the Eurozone and possible comments on monetary policy by ECB President Draghi.

The bounce in the EUR has been substantial this week and, while inflation figures are unlikely to have any material upward impact on the EUR. Soft numbers will be a negative however, with the markets looking for the ECB to do more than just the tapering to the asset purchasing program in the New Year.

Positive inflation figures out of the U.S and some hawkish FOMC member commentary has failed to reverse the EUR’s gains, with the Dollar under pressure ahead of today’s Senate vote on tax reforms.

EURUSD Finds Support as Risk Appetite Wains

Added upside for the EUR through the week has been the risk off sentiment that has seen the major indexes falling back from record or decade highs. The combination of positive economic data out of the Eurozone and the risk off sentiment is something that Draghi may want to pour cold water on, with the ECB keen to maintain a weaker EUR.

Asian markets in the earlier part of the day managed to shake off the negative sentiment and carry trades could ease pressure on the EUR through the European session, though with the markets focused on tonight’s vote, any material moves will likely be on hold.

FOMC members speaking later today include voting members Brainard and Kaplan. Hawkish commentary from both and a senate vote in favour of the tax reform bill could see the EUR move back to $1.16 levels. If it goes horribly wrong on Capitol Hill later today, $1.18 levels are more than likely and Draghi won’t be able to hold the EUR back.

It’s all down to the data, central bank commentary and ultimately the tax reform bill today. The markets have been so focused on the bill that Merkel’s troubles in forming a coalition government in Germany have largely gone unnoticed. Things could change tomorrow, with Friday having been set as the deadline for the parties to reach an agreement. The threat of a re-election would certainly be a negative for the EUR.