Euro juggles uncertainty

The euro’s drift lower over the last couple of trading days highlights the uncertainties surrounding the currency.

The fact that the last two trading sessions on Monday and Tuesday have ultimately seen EUR/USD drop by just four pips, while at the same time having a range of 75 pips, demonstrates the current lack of clarity surrounding the markets. This confused volatility is a consequence of a number of issues.

Firstly, we have the ongoing troubles in Ukraine. This morning the Crimean parliament unanimously voted to join Russia, which has thrown up many questions. Will the EU join in condemning Russian actions taken over the last week? If they were to do so, what sanctions would they impose and what would be the counter-reaction of Russia? Considering the proportion of oil and gas that Russia supplies to a number of EU countries, especially Germany, can the EU nations risk possible disruptions to this supply, and what knock-on effects might this have to the fragile recovery currently underway?

Secondly there is a wide array of data soon to be announced. We are due to hear from a number of the Federal Open Market Committee voting members in the next 24 hours ahead of Friday’s important non-farm payrolls, as well as US unemployment rate and trade balance figures.

As David Madden stated yesterday, we are still in a tight range. If Mario Draghi rules out a stimulus in the near future, we could see the euro trade higher. 

Spot FX EUR/USD chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts