• The US economy grew by 3.2% in the first quarter despite the difficult environment (global economy slowdown - trade conflicts). Federal Reserve said that the inflation remains below 2% while being patient with monetary policy.
• The EU economy remains weak due to the global slowdown and trade conflicts. European Bank`s monetary policy will remain unchanged (low interest rates) in the upcoming year. This is supporting the inflation and the GDP growth respectively.
Interest Differentials (EU AG US)
• The US Dollar remains supportive due to interest rate differentials (USD FAVOR). However, many investors believe that this advantage it’s already ‘’priced in’’.
Trade Talks (Impact on the economies)
• President Trump sees tariffs as net political positive. The heightened trade tension certainly has the potential to undermine the Markets and the US economy. China and the US are likely to reach a solution.
• The US data resumes disappointing as the markets are actively engaged while the FED will likely start cutting interest rates. The Trade conflict continues supporting the US Dollar (FX volatility high) now if resolved then the Greenback will start depreciating.
The EUR/USD is bearish since Feb in 2018 without correction. The market is still oversold (see above chart) and the expectations for EUR’s weakness could be limited.
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