BTMU - "EUR/USD – bullish bias – (1.3350-1.3750)
The euro has derived upward momentum against the US dollar from the more dovish outlook for Fed monetary policy. The still exceptionally loose monetary policy stance of the Fed stands in starker contrast now to the gradual tightening in overall monetary conditions in the euro-zone as excess liquidity in the Eurosystem is gradually declining. ECB President Draghi has already strongly signaled that he will not tolerate a material tightening in overall monetary conditions while the economic recovery in the euro-zone remains fragile. Disinflationary pressures in the euro-zone also appear greater than in the US. The euro-zone PMI surveys for September are likely to remain consistent with gradual economic recovery. Further easing from the ECB may be required before year end to prevent EUR/USD from breaking above the previous annual high of 1.3710 recorded in early February. The ECB’s commitment to maintain low or lower rates for an extended period will likely need to be backed up by action."