The following are EUR/USD range and and outlook for next week as provided by Bank of Tokyo-Mitsubishi UFJ, Ltd (BTMU).
EUR/USD – neutral bias – (1.3700-1.4000)
The euro continues to remain very stable against the US dollar in the near-term with the EUR/USD rate having traded between 1.3788 and 1.3893 over the last eleven trading days. The ECB has clearly signalled that euro strength is becoming increasingly important for the outlook for inflation in the euro-zone. The increasing likelihood of further ECB monetary easing is helping to dampen further euro upside potential in the near-term.
Still, the euro continues to derive support from the strengthening cyclical economic recovery in the euro-zone which is likely still encouraging strong portfolio inflows into the euro-zone. However, the improving economic growth outlook is unlikely to significantly ease the ECB’s concerns over low inflation in the euro-zone.
The release of the euro-zone CPI estimate for April will be in focus in the week ahead. A further weak inflation reading would likely reinforce market expectations that the ECB will soon ease monetary policy further weighing modestly upon the euro.
The US dollar is also likely to derive modest support in the near-term from the strengthening US economy. The improving growth outlook argues in favour of the Fed tapering QE by a further USD10 billion in the week ahead.