Euro Rate Forecast: Bullish Breakouts Abound - Levels For EUR/CHF, EUR/JPY, EUR/USD

EURO TAKES ADVANTAGE OF DOLLAR’S DIFFICULTIES

As if often the case, a new month brings about new fortunes. The US Dollar (via the DXY Index) has hit fresh two-year lows, largely driven by gains appreciated by its largest component, the Euro. To say the Euro is having a good start to a new month is an understatement. The Euro is starting off December on strong footing, with all EUR-crosses rallying thus far on December 1.

The slew of US policy officials, from Federal Reserve Chair Jerome Powell to the likely next Secretary of Treasury, Janet Yellen, calling for more fiscal stimulus – which would reduce US real yields, undermining the US Dollar’s relative appeal – has done the greenback no favors. But the FX market isn’t USD-centric, despite appearing to be the case; the Euro’s gains on the day are not just due to the dollar’s difficulties, but some behind the scenes machinations at the European Central Bank.

ECB SCANDAL MAY HINDER ABILITY TO TAMP DOWN EURO

In what may be a spat of meaningless news to the average market observer, the story that ECB policymaker Philip Lane has been providing exclusive commentary to a select group of individuals and institutions is certainly meaningful, if not out an outright scandal. But it’s the type of scandal that could handcuff the ECB from materially altering the Euro’s near-term path.

The point is, Philip Lane is a dove’s dove, perhaps the most outspoken dovish member at the ECB. And now that he is in the spotlight given his actions that provided privileged information to a select number of individuals and institutions, his voice may be sidelined in the near-term.

While the odds of more stimulus from the ECB have increased due to the disappointing economic data, it stands to reason that having Mr. Lane’s voice tamped down will reduce the likelihood that the ECB takes drastic measures like directly influencing the Euro exchange rate.

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