EURUSD Major Events
The Euro is being affected by many fundamental events as we near the end of 2018. It is fairly important to be aware of the outside market events that drive EURUSD higher or lower in the Foreign Exchange (Forex) market.
We have gathered a list of the key fundamental events that may have a fairly significant impact on Euro Dollar in the Foreign Exchange market. Every forex trader (technical or fundamental) must be fully aware of these economic events.
US – China Trade War
Since President Trump was elected as the US President the US administration has been targeting China. The US is attempting to dent China’s competitiveness by imposing tariffs, which may bring some Chinese-based companies into the US.
China has retaliated by imposing tariffs on US goods, which lead to the IMF cutting the growth forecast for the United States and China due to these tariffs.
The US Dollar (USD) is currently able to maintain its safe-haven status despite the rate hikes by the Fed. The trade war between the US and China triggered USD strength against a basket of currencies while when the tension is diffused USD weakens in the Forex market.
US Treasury Yields
The US is demanding the Yuan (CNY) will be part of a future trade deal between the countries. The United States is accusing China of intentionally weakening its currency to boost its competitiveness.
Strong gains were recently seen in US treasury yields. Fed Kaplan expressed his concern with the sharp rise in the yields as it can force inflationary pressures.
Indonesia central bank also expressed its concerns with the current Fed monetary policy as the rate hikes affect emerging markets. President Trump also expressed his discontent with the recent interest rate hikes.
The US treasury yields may continue to dominate EURUSD in the short-term until the dust is settled. It is one of the key charts to monitor as we near the end of 2018.
Italy Budget 2019
Italy’s proposed budget is on a collision course with Brussels. The new Italian government insists on passing a budget that is rejected by the European Union (EU).
Italian lawmaker stated that Italy will be better off without the Euro, which sent bearish shivers across EUR pairs and crosses. Later during the day Italian officials reaffirmed the government has no plans or intentions to leave the Euro.
Italy’s budget continued weighing on the market as the Italian government remained firm, unwilling to alter the budget. However, it has been reported that Savona hinted the budget may have to be changed should the market pressure continues, mainly the yield spread with Germany (Italy’s Prime Minister, Conte).
At the time of this writing Italy was one of the fundamental events that triggered some selling in Euro Dollar.
ECB Monetary Policy
Mario Draghi, the President of the European Central Bank (ECB) affirmed in the central bank’s prior meetings that a rate hike may not take place until the summer of 2019 if not beyond.
The ECB may re-assess the current interest rate in January, 2019. If a rate hike will be discussed in January it may trigger strong volatility across EUR pairs and crosses.
The European Central Bank (ECB) affirmed rates will remain low, which lead the market to price-in only a 50% chance for a rate hike in September 2019.
Brexit and UK Budget: Make or Break
The EU cancelled its planned meeting in November on brexit, a summit will only be held should EU Barnier report progress has been made. The Irish border is currently the main obstacle in the brexit negotiations.
Some focus will be on the UK budget statement on Monday as no deal has been made with the EU at the time of this writing. The budget statement is expected to be made on 29 October, 2018 and may trigger some reaction across GBP pair and crosses in the Forex market.
It has been reported that the UK budget may include a cut in business rates for small retailers, estimated to be around GBP 900 million.
US Midterm Elections
The US midterm elections are scheduled to take place on 6 November, 2018. The outcome of the vote may have some impact on the US Dollar as well as US indices such as the Dow and SP500.
According to some polls the Democrats are in the lead of gaining control over the House of Representatives. Should the Democrats win it may be more difficult for President Trump to implement his policies.
It is still too early to determine how EURUSD will react to the midterm elections, we will monitor the markets and determine how we wish to proceed with our forex signals.