**EUR/USD Weekly Forecast: ECB Holds Steady as Trump Stirs Market Volatility**
*Based on the original article by Yohay Elam, FXStreet*
The EUR/USD currency pair experienced turbulent trading in the previous week, primarily influenced by neutral monetary policy signals from the European Central Bank (ECB) and renewed geopolitical and economic uncertainty stemming from headlines in the United States, particularly related to President Donald Trump. The euro has remained within a relatively tight range, under pressure but not decisively bearish. This week, the focus shifts to upcoming economic data, political developments in the U.S., and whether the ECB’s current strategy proves sustainable amid rising global economic tensions.
Below is a comprehensive analysis and weekly forecast for EUR/USD with a focus on key drivers, technical outlook, and potential market-moving events.
**Recap: Previous Week in Review**
The EUR/USD pair recorded modest gains early in the week before pulling back toward the 1.1200 level, as investor sentiment remained cautious. Here’s a breakdown of what influenced price movements:
– The ECB maintained its current monetary policy stance, signaling a pause rather than any imminent easing, as previously speculated.
– Though ECB President Mario Draghi acknowledged downside risks, the tone was not as dovish as the markets had priced in.
– In the U.S., continued political noise surrounding President Trump impacted risk sentiment and the dollar’s performance.
– Mixed economic data from both the eurozone and the United States added to the uncertainty, limiting strong price action in either direction.
**ECB Holds Fire: A Pause with a Dovish Tilt?**
Markets had anticipated more decisive easing measures from the ECB, but instead, the central bank opted to hold off and wait for more data. Key takeaways from the ECB’s meeting include:
– The refinancing rate remains unchanged at 0.00 percent, the deposit rate at -0.40 percent.
– ECB President Mario Draghi acknowledged increasing economic uncertainties but stopped short of announcing a new round of monetary stimulus.
– Draghi indicated that the ECB stands ready to act if inflation expectations continue to deteriorate.
– Updated forward guidance pointed to rates staying at present or lower levels through at least the first half of the following year.
This approach disappointed market participants who expected a more aggressive policy response. The euro managed to recover slightly following the ECB’s decision, showcasing resilience in the face of subdued expectations.
**U.S. Developments: Trump’s Moves Keep Investors on Edge**
On the U.S. side, the Federal Reserve recently cut rates for the first time in over a decade, citing global uncertainties and muted inflation. However, it signaled that this is not necessarily the start of an extended easing cycle.
President Trump has remained a critical factor influencing global markets:
– Trump has continued to criticize the Fed for not being aggressive enough in cutting rates.
– Trade tensions resurfaced after Trump announced additional tariffs on Chinese imports, sparking renewed global risk aversion.
– Political chaos surrounding the Trump administration, including new investigations and legal developments, weighed on market sentiment.
These factors have collectively created a volatile environment for the U.S. dollar, offering occasional support to the euro even without strong eurozone fundamentals.
**Eurozone Fundamentals: No Breakout Yet**
Despite some relief from ECB inaction, the eurozone’s economic picture remains fragile. The manufacturing sector continues to struggle, particularly in Germany, while inflation remains below target. Recent data include:
– Eurozone PMI for manufacturing remains below 50, signaling contraction.
– German factory orders and industrial production figures surprised to the downside.
– Inflation continues to hover near 1 percent, far from the ECB’s target of close to 2 percent.
– Consumer confidence remains subdued in many eurozone countries.
Given these developments, investors are watching closely for signs that could push the ECB into more aggressive action in the coming months.
**Key Technical Levels for EUR/USD**
A technical examination of the EUR/USD chart shows the pair caught in a consolidative range, lacking the momentum
Read more on EUR/USD trading.