MUFG Research discusses EUR outlook and flags a scope for EUR/USD to stay bid in the near-term on an increased demand as China’s data keep improving.
“The key beneficiary of a global pick-up is going to be Germany. The largest exporter has been hit hard by the China slowdown along with the recession in Italy and the financial crisis in Turkey last year. Good news from China adds to better industrial production data from Italy (Feb IP gained m/m for second consecutive m/m increase, the best growth since the end of 2017) and from Turkey. Italy, Turkey and China were three of the five biggest drags on exports from Germany in the year to Q1 2019. Finally, the removal of imminent Brexit risks will probably add to better business condition in Germany,” MUFG notes.
“EUR/USD dropped from 1.1800 in September to the recent lows around 1.1200 and there is building evidence to argue for some reversal in that decline. Adding support for this reversal to unfold is the break in USD/CNY below the 6.7000 level for the first time since 20th March.
Conditions are ripe for some increased EUR demand over the near-term but expect market caution today ahead of the key advance PMI readings tomorrow,” MUFG argues.