EUR/USD follows the trajectory markets saw in 2017-2018 – Société Générale

The US Presidential election race in 2016 brought President Trump to power on 8 November. EUR/USD opened at 1.09 that day and fell to a low of 1.03 amid the chaos of January 2017. After that, EUR/USD rallied as US economic data deteriorated, and markets started to speculate about a possible ECB rate hike, Société Générale's FX analyst Kit Juckes notes.

EUR/USD repeats its own movements from 2017-2018

"At the June 2017 Sintra meeting, “un vent d’optimisme a soufflé sur les forêts d’eucalyptus,' according to ‘Le Monde’. Amid excitement about ECB policy normalization, EUR/USD reached 1.14 by mid-year and 1.20 by August, then peaked above 1.25 in February 2018 before falling back to 1.15 by the end of 2018, 1.12 by the end of 2019, and briefly to 1.07 in March 2020 as Covid unleashed chaos on the global economy and markets."

"If we look at the movements of EUR/USD against the evolution of consensus GDP growth forecasts, Eurozone minus US, for 2017 and 2018, using Bloomberg data, we can see that EUR/USD rode a wave of relative optimism. In 2017, the US consensus growth forecast essentially drifted sideways while the European one rose, while in 2018, the US forecast rose steadily while the Eurozone one fell back."

"The currency parallel is stronger than the economic one. At the moment, the US consensus growth forecast for this year is steady around 1.4% after collapsing in March/April from 2.3%. Eurozone forecasts are just beginning to rise from a low of 0.8% earlier this month to 1% now. But maybe all the euro needs to move higher is for US growth forecasts to stay anchored while the Eurozone consensus inches slightly higher."