EUR/USD: Directionless: Range & Outlook
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EUR/USD – NEUTRAL BIAS – (1.0900-1.1300)
The macro-economic consequences of the referendum result in the UK last week will have greatest impact on the UK but there will also potentially be a notable impact on the euro-zone. ECB President Draghi estimated a possible 0.5ppt hit to real GDP from Brexit.
There is not much in the way on information to provide any clues on the impact at this stage but a further recovery in bank equity prices would help alleviate concerns and help support the euro. The EUR/USD impact from Brexit has been marginal with only a very slight drop recorded over the month of June as a whole. The combination of a record current account surplus and the ECB QE policy that helped keep debt market stable was a key factor in EUR stability.
Next week might see EUR/USD being slowly more influenced by developments in the US with some key data like the ADP and NFP employment report being released. Still, we can’t see any big moves at this stage with the markets likely to remain convinced that the Fed can remain patient for some time given the shock to the markets from the Brexit vote.
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