FXStreet (Edinburgh) – Senior Analyst at Danske Bank Sverre Holbek assessed the potential drivers for further downside in EUR/USD.
Key Quotes
“The USD gained further yesterday supported by stronger-than-expected US data”.
“Overall, sentiment in the FX market seems to have returned to a fairly bullish USD mode suggesting that EUR/USD could continue to trade on a heavy note in the near term”.
“There are probably three reasons that can explain this shift in sentiment. Firstly, ECB’s decision to front-load its asset purchases in May and June, in our view, took out some upside risk in EUR/USD altering the risk/reward profile on short EUR/USD bets in a more positive direction”.
“Secondly, US data have surprised on the upside over the past week supporting the case for a rebound in GDP growth in Q2 and not least a Fed rate hike in H2 15”.
“Thirdly, Grexit concerns are also likely to spur some EUR/USD selling. Although yesterday’s price actions did not show signs of an increased euro risk premium, this theme is expected to develop in the coming weeks as negotiations heat up”.
(Market News Provided by FXstreet)