EUR/USD: is the euro now poised for a rally? (Westpac)

Westpac recommends buying EUR/USD pullbacks near 1.1350, as they suggest that the USD's recent pullback, prompted by President Powell's comments on the Fed's flexibility and patience, as well as weaker PMIs, signal a slowdown in the US growth's outperformance.

Upcoming Fed members' speeches (16 scheduled this week and next, Presidents Powell and Clarida on Jan. 10) should underscore the market's belief that the Federal Reserve's policy normalisation is not a trajectory that's on auto pilot.

Strong employment data in the United States has eased fears of a slowdown, but doubts will persist. First quarter US data tends to consistently exceed expectations. The partial closure of the US government is now in its third week, with no end in sight.

The White House threat of bypassing Congress and invoking emergency powers to build a wall on the southern border will increase the level of partisan grudge in Washington.