WHERE WILL THE EUR GO NEXT?
Trading Plan
Baseline
Short-Term Sentiment Bias:
- Euro under pressure, trading below $1.05 due to ECB rate cuts and political uncertainty in France and Germany.
- Markets expect an additional 50 basis points cut by February.
Upcoming Risk Events:
- German Manufacturing PMI (Dec): Previous: 43.0, Consensus: 43.1.
- German Services PMI (Dec): Previous: 49.3, Consensus: 49.5.
- Eurozone Flash Manufacturing PMI: Previous: 45.2, Consensus: 45.3.
- Eurozone Flash Services PMI: Previous: 49.5, Consensus: 49.5.
Surprise:
Positive Surprise:
- Outcome: PMI beats expectations.
- Trade: Long EUR/CHF (bond yield spreads suggest upside).
Negative Surprise:
- Outcome: PMI misses expectations.
- Trade: Quick scalp on EUR/NZD (slight downside based on bond yield spreads).
Bigger Picture
Macro-Fundamental Bias
- ECB's Stance: Data-dependent approach, removed restrictive rate stance.
- Inflation Outlook: Headline inflation projected to average 2.4% in 2024, decreasing to 1.9% by 2026.
- GDP Revisions: Lowered to 0.7% in 2024 and 1.1% in 2025.
- Market Expectations: Continued rate cuts expected due to weak growth and low inflation.
Baseline
Short-Term Sentiment Bias:
- Euro under pressure, trading below $1.05 due to ECB rate cuts and political uncertainty in France and Germany.
- Markets expect an additional 50 basis points cut by February.
Upcoming Risk Events:
- German Manufacturing PMI (Dec): Previous: 43.0, Consensus: 43.1.
- German Services PMI (Dec): Previous: 49.3, Consensus: 49.5.
- Eurozone Flash Manufacturing PMI: Previous: 45.2, Consensus: 45.3.
- Eurozone Flash Services PMI: Previous: 49.5, Consensus: 49.5.
Surprise:
Positive Surprise:
- Outcome: PMI beats expectations.
- Trade: Long EUR/CHF (bond yield spreads suggest upside).
Negative Surprise:
- Outcome: PMI misses expectations.
- Trade: Quick scalp on EUR/NZD (slight downside based on bond yield spreads).
Bigger Picture
Macro-Fundamental Bias
- ECB's Stance: Data-dependent approach, removed restrictive rate stance.
- Inflation Outlook: Headline inflation projected to average 2.4% in 2024, decreasing to 1.9% by 2026.
- GDP Revisions: Lowered to 0.7% in 2024 and 1.1% in 2025.
- Market Expectations: Continued rate cuts expected due to weak growth and low inflation.
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