• EUR/USD is trading slightly in the green in the 1.1330s, unmoved by more strong US data.
  • Analysts remain cautious on the euro, amid pandemic, dovish ECB and Turkey-related concerns.

Whilst strong, the latest US weekly jobless claims and regional Fed manufacturing survey data releases have so far failed to revive the kinds of broad USD strength seen in recent sessions. EUR/USD continues to trade with very modest on-the-day gains of about 0.1% or roughly 10 pips as the US dollar rally takes a breather. The pair is currently trading in the 1.1330s, about 0.6% above Wednesday’s lows in the 1.1260s.

Whilst the euro is enjoying some overdue respite versus the dollar, many analysts remain wary. Societe Generale points out that the ECB has thus far not said anything about the recent decline in the EUR/USD exchange rate. “This suggests that the central bank is comfortable with the new level of EUR/USD at 1.13 and the speed of the depreciation since last week”, the bank said. In other words, traders might view ECB silence as a green light for further euro depreciation. ING notes that the ongoing surge in Covid-19 infections in the Eurozone is another downside risk for the euro. Any associate lockdowns could “dent the recovery in the services sector just as the manufacturing sector is struggling with supply chain disruption”, they say.

Elsewhere, MUFG says that “recent market developments are making us more nervous over negative potential spill-over effects from Turkey”, before adding that “the most intense phase of the lira sell-off in the summer of 2018 did have a material impact on G10 FX performance… in August 2018, the EUR/USD rate temporarily dropped from around 1.1700 to a low of close to 1.130”. “The developments (in Turkey) could already be contributing to increasingly bearish euro sentiment in the near-term” the bank concludes.

Looking ahead to the rest of the session, central bank speakers populate an otherwise bare calendar. Fed Board of Governors member and NY Fed President John Williams and ECB Chief Economist Philip Lane are both slated to speak at 1430GMT. FOMC member Evans is then slated to speak at 1900GMT. Referring to the speech from ECB’s Lane, Credit Agricole notes that “by now the EUR should be used to his uber-dovish tone” and that “the oversold EUR could instead rely on technicals to eventually halt its longest streak of daily losses in over two years”.

This article was originally published by Fxstreet.com.Read the original article here.

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