The euro licks its wounds after a decline on ECB Draghi statements which were cautious and in fact haven’t brought anything new to investors. EURUSD dropped to fresh one-week low of 1.1635 during the Asian hours on Friday and now attempts to regain ground.
Meanwhile, market focus shifts from a non-event ECB meeting to the US Q2 GDP report, which could have a significant influence on the dollar and the Treasuries. Economists expect the US economy grew at an annualized pace of 4.2% in the second quarter which is the best growth rate since the third quarter of 2014. Should the figures come in really strong, the dollar will get a bullish impetus, but it won’t last as the two more Fed hikes this year have been priced in already.
But disappointing figures could send the greenback substantially lower as the market expectations are very high, due to Trump’s hints as well. Therefore, a lower-than-expected GDP growth rate could send the EURUSD pair north with the key target at 1.17. In this scenario, the upside potential will be strengthened by yesterday’s decline in the single currency as it looks more attractive for bulls now.
By Helen Rush
Senior Analyst at Capital Markets