EUR/USD: Risks titled to the downside as the stage is set for an important week for the euro.

The pullback for the US dollar has helped to lift EUR/USD back above the 1.01-level t after it failed to break decisively below parity last week. As economists at MUFG Bank note, it isn important week for European Central Bank (ECB) policy and Italian politics.

An important week for the EUR.“It is an important policy meeting for ECB as they are expected to begin raising rates for the first time since July 2011. At the same time, market participants are eagerly awaiting details of the ECB’s plans for a new anti-fragmentation policy tool. It is of crucial importance that details of the new tool convince market participants that the ECB can help to keep a lid on fragmentation risk. The last thing that the eurozone needs right now on top of the ongoing negative shock from the Ukraine conflict is a further blow out in peripheral spreads that would reinforce downside risks to growth.”

“The developments have increased the risk of an early election in Italy. A further increase in political uncertainty would result in tighter financial conditions and disrupt efforts to pass the budget and economic reforms needed to access EU Recovery Funds. We still believe risks remain titled to the downside for the euro.” 

 EURUSD keeps range around 1.0100 amid US dollar pullback

EURUSD is trading around 1.0100, amid a broad US dollar retreat and Italian political uncertainty. Easing fears over aggressive Fed tightening and China’s policy support lift the market mood. All eyes remain on this week’s ECB rate hike and Nord Stream 1 decision. 


GBP/USD hovers around 1.1900 amid upbeat mood

GBP/USD is clinging to recovery gains at around 1.1900, capitalizing on the extended risk-on rally in global markets. The safe-haven US dollar retreats further from two-decade highs amid easing bets of a 100 bps July Fed rate hike. UK political drama will remain in play. 


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