The lackluster Euro upmove is not really out of keeping with the environment

It’s hard not to see central banks in disarray. Sweden’s Riksbank cut rates in a surprise move and the krona went up. In the US, Atlanta Fed Bostic said there is no need for another rate cut and new member Miran said we need five. Powell speaks at noon today with some holding their breath, which is inconsistent with what we know about Fed chiefs and especially Powell. 

In Japan, yesterday we saw some reports indicating the probability of the rate hike in October going up, if not exactly rip-roaring. The party election is Oct 4, which should make no difference to the BoJ but you never know.

Forecast

The lackluster euro upmove is not really out of keeping with the environment, which consists of one uncertainty after another. The pile of uncertainties is turning into a mountain. No wonder gold is setting new highs. The best we can offer is that the trendline is to the upside, although it will be a bitterly fought journey to 1.20 and above. On the downside, we are not likely to see anything much below 1.1650, where prices are clustered over the past few weeks. ECR Research has 1.1500.

All this flies out the window if yields resume their climb. As noted last week, the 10-year at 4.5% and above derails the euro forecasts. And when in doubt, consider the cross-rates. The euro looks good against the pound and CHF. 

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