EUR/USD: The downside risk is likely to dominate

The January inflation data for the Eurozone could provide a mild tailwind for the Euro. Nevertheless, the lower end is likely to remain the weaker one for now, economists at Commerzbank report.

Storm clouds are gathering for the manufacturing sector

“Even though ECB representatives have sounded restrictive recently, a high inflation result today might push the rate expectations for the Eurozone upwards a little again, with this providing short-term support for the Euro. However, yesterday’s PMIs for the EZ illustrated that storm clouds are gathering for the manufacturing sector.”

“Concerns that the ECB’s monetary policy is beginning to increasingly slow the industrial sector might put pressure on the Euro again in the end. Another reason why the downside risk in EUR/USD is likely to dominate after all.”

“And there is another factor that could put a spoke in the Euro's wheel: increasing tensions between the US and Russia following Russia's announcement of the suspension of the nuclear disarmament (START) treaty. At least one eye should probably be kept on the developments in this matter.”

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