© Reuters. A good surprise on the european GDP could lift the Euro, according to the SG
Traditionally, the basic trends of the EUR/USD pair depend on especially of the monetary policy in Europe and the United States, and differences in rates that result. However, for the past several months, the pair seems to be not correlated to these factors.
In reality, it seems rather that the EUR/USD is evolving in response to growth expectations, which are significantly degraded in the last one year, during which period the Euro has displayed a downward trend to the bottom.
This, in fact, notes Kit Juckes, analyst for societe generale (PA:SOGN), who believes that a good surprise on the GDP of the european of tomorrow could help to a bullish reversal in the EUR/USD :
“Why is it that I think that an upside surprise in GDP growth would be sufficient to give a boost to the euro? Because the EUR/USD has ceased to follow the rate or the relative returns, nominal or real, short or long term, and monitors instead the growth forecasts.
The year 2017 has been marked by a strong improvement of growth forecasts, which have convinced the ECB to make an announcement of a normalization of the monetary policy. In part because of the strong rise of the euro, the past year has been marked by a very sharp deterioration of growth forecasts, a phenomenon that has led to the currency in its wake. This reflection on the growth was enough thrust, perhaps even too far. “
In other words, Juckes believes that the market may be too pessimistic on the growth outlook in Europe, and a good surprise on the figures of european growth in Q1 could lead to a new re-evaluation, more positive, expectations.
We will, therefore, be highly attentive to the publications of tomorrow morning, with the preliminary GDP in Q1 2019 France at 7: 30, Spain at 9am, and the whole of the euro area at 11am.
