Forex Year Review - EUR
It is fair to say this has not been a good year for the Euro. The area has struggled with inflation and growth and the economic powerhouse of the region (Germany) has struggled due to the US-China trade war. In my opinion, Mario Draghi has been the most boring central banker the world has ever seen and now Christine Lagarde has taken over maybe we could see some action from the ECB. In the whole of Draghi's reign, he didn't increase interest rates once. The massive amounts of QE and asset-buying have not stimulated the economy it seems to have only made the rich richer and the poor worse off.
EUR/USD has struggled against the dominance of the dollar and the recovery in GBP after the general election. The high if 1.1659 was seen very early on in the year and the price didn't manage to recover to that point at any other time in the year. Investments away from the Eurozone looked more attractive as the Chinese pulled orders due to the trade war. The major car producers struggled as global sales faltered with Trump adding tariffs on imports and a slowdown in sales. We are currently seeing a recovering in the EUR/USD pair but we are nowhere near levels that were seen at the beginning of the year.
Moving forward the strength of the euro could depend on US policies and politics in my opinion. If the Fed holds steady with their "wait and see" policy the euro could benefit as it may reap some of the rewards from the latest round of QE. Inflation is the main concern as the Japanification of the block means competitiveness has not returned. Consumer prices can only rise in a thriving economy and I just can't see that from the EU at the moment. If the data improves and GDP numbers pick up as predicted it will be because the global growth story has improved. Remember the EU is losing the UK and this will be a big hit unless the transition deal is smooth. However, this negative story does not mean the EUR/USD pair will continue to struggle as its already trading at relatively low levels. We just need to see if the Eurozone does not capitulate, which is not expected to do.