WHERE WILL THE EUR GO NEXT?

Trading Plan

Baseline

Short-Term Sentiment Bias:
- Euro under pressure, trading below $1.05 due to ECB rate cuts and political uncertainty in France and Germany.
- Markets expect an additional 50 basis points cut by February.


Upcoming Risk Events:

- German Manufacturing PMI (Dec): Previous: 43.0, Consensus: 43.1.

- German Services PMI (Dec): Previous: 49.3, Consensus: 49.5.

- Eurozone Flash Manufacturing PMI: Previous: 45.2, Consensus: 45.3.

- Eurozone Flash Services PMI: Previous: 49.5, Consensus: 49.5.


Surprise:

Positive Surprise:
- Outcome: PMI beats expectations.
- Trade: Long EUR/CHF (bond yield spreads suggest upside).

Negative Surprise:
- Outcome: PMI misses expectations.
- Trade: Quick scalp on EUR/NZD (slight downside based on bond yield spreads).


Bigger Picture
Macro-Fundamental Bias
- ECB's Stance: Data-dependent approach, removed restrictive rate stance.

- Inflation Outlook: Headline inflation projected to average 2.4% in 2024, decreasing to 1.9% by 2026.

- GDP Revisions: Lowered to 0.7% in 2024 and 1.1% in 2025.

- Market Expectations: Continued rate cuts expected due to weak growth and low inflation.