Euro is preparing for a new breakthrough

By 13/11/2020News
Morning Stock News

Gold  1878,605
(+0,10%)

EURUSD   1,1807
(+0,01%)

DJIA  28964
(-0,35%)

OIL.WTI  40,67
(-0,61%)

DAX   12979,70
(+0,01%)

We all remember how, from late spring to mid-summer, the S&P 500 rally pushed up the EUR/USD pair. The pair then went from 1.08 to 1.18. The fourth quarter of 2020 is very similar to the second quarter. Will this story really happen again?

EUR/USD

EURUSD

We are now seeing the US stock market begin to reverse the upward trend after the presidential election. Investors predict that Democrats will provide unprecedented support to the economy and pour huge amounts of liquidity into financial markets. It is also worth noting that in a period of uncertainty before the election, many investors were cached and are now beginning to return to risk assets.
In this situation, the US dollar is likely to increasingly lose ground against major world currencies.


What is happening now in Europe?

Coronavirus is spreading more and more throughout Europe, but this time the government is trying to control the situation. People continue to work and various quarantine measures are being introduced, but it can already be seen that the second wave of the disease is being controlled in a more organised way.
In general, the economy is not falling apart like it was in spring, and it is likely that in this condition Europe will be able to wait for a vaccine to help stabilise the situation.
Of course, the ECB does not like this kind of Euro at all, as the cheap Euro always supports exports and speeds up inflation. It is no accident that Christine Lagarde, in her last speech, confirmed the effectiveness of the emergency asset buyback programme due to the pandemic, as well as the anti-crisis early refinancing operations. From her words, we can assume that these actions from the ECB will continue in the near future.


Will the Euro go higher?

The ECB balance sheet is growing at a slower pace than the US Federal Reserve, so we can now assume that the EUR/USD pair has the potential to grow to at least the nearest level at 1.20, although the ECB will try to prevent this in many ways. But everybody remembers when the Bank of England’s monetary policy easing announcement led to the pound rising in November. The same thing could be repeated for the Euro.
Of course in the current situation a lot will depend on the state of the US financial markets, but the Euro bulls have a good chance of showing themselves.


What awaits us today?

08.45 Harmonised consumer price index in France for October
11.00 Eurozone GDP for Q3 and since the beginning of the year
14.30 US producer price index for October


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.