What to Expect from the Euro This Week

Euro remains strong amid geopolitical tensions

The euro (FXE) closed the week ending August 11 at 1.18 against the US dollar (UUP). The currency appreciated 0.42% in the previous week and looks set for continued appreciation in the days ahead. Tensions between the US and North Korea led to the depreciation of the US dollar against the euro. There were no economic data releases from the Euro area, but the continued positive momentum turned the tide in the euro’s favor. The currency, however, lost ground against the Japanese yen and the Swiss franc as demand for safe-haven currencies increased last week.

European equity markets (VGK) were volatile and recorded losses in line with global markets. The German DAX (DAX) was down 2.0%, the Euro Stoxx (FEZ) was down 2.9%, and France’s CAC was down 2.8% in the previous week.

What to Expect from the Euro This Week

Euro speculators increase their bets

As per the latest Commitment of Traders report, released on August 11 by the Chicago Futures Trading Commission, currency market speculators added 11,048 euro long contracts up to Tuesday in the same week. The total net speculative bullish positions on the euro (EUFX) stand at 93,685 contracts as compared to 82,637 contracts in the previous week. We can expect a further increase in long positions as the current economic climate remains positive for the European union.

The week ahead

Economic data is likely to have a limited effect if the current geopolitical tensions continue. German and European 2Q GDP and European inflation data are on tap this week. If there are no negative surprises in the data, further gains in the euro cannot be ruled out. The current positive momentum is likely to drive the euro’s appreciation, and there is a strong possibility of the euro-dollar pair breaking the 1.19 level after this week’s FOMC meeting minutes.