EUR/USD – NEUTRAL BIAS – (1.1100-1.1350)
The euro continues to trade within a very narrow range against the US dollar in the near-term awaiting a catalyst for fresh direction.
The main focus in the week ahead from the US side of the equation will be the release of the latest updates on the health of the economy including the ISM and ADP surveys for September, and the latest opinion polls ahead of the Presidential election. The ISM surveys are expected to rebound after declining sharply in August. Any further unexpected weakness in the ISM surveys could weigh more heavily on the US dollar heightening concerns over the loss of US growth momentum. In contrast, US employment growth has remained more solid which is expected to have continued in September.
The latest opinion polls will be watched closely to see if Hillary Clinton’s perceived victory in the first Presidential debate has resulted in a material boost to her support. The recent narrowing of Hillary Clinton’s lead in the polls suggests a close race which if sustained could begin to weigh more on the US dollar on fears over Donald Trump becoming President.
In Europe, investor concerns over the health of European banks have re-heightened over the past week but are not expected to materially weaken the euro in the near-term,
The key event on the euro side of the equation will be the flash inflation data tomorrow and the ECB minutes of its September meeting. Inflation is expected to drift higher while the minutes may reveal some thinking behind the reasons for launching staff studies on best ways to sustain QE policies.
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