EURUSD forecast for 13.07.2020

July 13, 2020

EUR/USD forecast: three news for euroDmitri Demidenko

Fundamental Euro forecast for today

EUR/USD traders will focus on the US stock indices and the meetings

of the ECB and the EU

Nothing lasts forever. The Euro strengthens, being supported by the effective emergency measures taken by the ECB and the EU governments to save the euro-area economy from the recession caused by the pandemic. The end of the lockdown and the recovery of the euro-area GDP is going faster than it was expected. However, everything could turn opposite if the number of coronavirus cases soars in Europe, and the Frugal Four, Austria, Sweden, Denmark, and the Netherlands block the EU fiscal stimulus. However, this is a pessimistic scenario. I prefer a more optimistic scenario.

The start of the US earnings season, the ECB meeting and the EU summit are the highlights of the week through July 17, which should have a great impact on the [EUR/USD][1] trend. The rally of the US stock indexes weighs on the greenback. However, if the gloomy forecasts of the Wall Street experts come true, the euro will lose its important growth driver. According to FactSet, the earnings of the companies, whose shares are included in [the S&P 500][2] will drop by 45% Y-o-Y in the second quarter. The Dow Jones Market Data notes that the difference between [the S&P 500][2] forecasts is 50 cents on paper, compared with 40 cents in the first quarter. The average difference over the past 13 years ranged from 9 cents to 16 cents. The wide gap means that the US stock market can face a wild ride.

In my opinion, the worse are the forecasts, the higher is the chance that the actual data will show a better performance. It could be good news for the euro. The [S&P 500][2] is rising not only because of great stimuli but also because of the talks that the creation of the coronavirus vaccine and a decline in the fatality rate should compensate for the negative news on the record number of the coronavirus cases.

Dynamics of changes in new COVID-19 cases and the infection fatality

rate in the USA

![LiteForex: EURUSD forecast for 13.07.2020][3]

Source: Trading Economics

While the US considers the risks of the second lockdown, the euro-area economy is recovering fast. The euro-area economic recovery is two- speed. Like in the cases with trade wars in 2018-2019, strong domestic demand compensates for the drop in exports. Investors expect a V-shaped rebound of the European GDP, which narrows the yield spreads between government bonds of the peripheral countries and Germany. They are the primary indicator of financial stress in the euro area.

Dynamics of Italy-Germany bond yield spread

![LiteForex: EURUSD forecast for 13.07.2020][4]

Source: Bloomberg

However, if the European Central bank shares the opinion of Klaas Knot, everything can change very quickly. Dutch central bank governor suggests the ECB asset purchases could fall short of the total QE program of €1.35 trillion if the bloc’s economy recovers faster than expected from the Covid-19 crisis. If the ECB monetary policy is tightened too early, both the euro-area stock market and the euro will be pressed down. Let us hope this doesn’t happen.

It would be a positive driver if the French-German emergency plan is adopted at the EU summit. Angela Merkel noted that the Eurozone couldn’t afford to waste time, which suggests the plan is likely to be approved. If so, the [EUR/USD][1] could go up from the trading range of 1.11-1.14 and continue rising.

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Price chart of EURUSD in real time mode

![EUR/USD forecast: three news for euro][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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