EUR/USD: A governor's council meeting impacted by the trade war

The euro continued to climb higher - or, alternatively, the dollar continued to suffer - in the context of an intense and uncertain trade war, where the lines are shifting according to Donald Trump's presumed instincts. This Thursday, the European Central Bank (ECB) will have the difficult task of completing its Governing Council meeting in these foggy market conditions.

Maxime Mura, IG Rates and Credit Manager at Swiss Life Asset Managers France, expects "a 25 basis point cut in key interest rates in the eurozone, in line with the market consensus. In January, we were already anticipating a cut in April, as well as at each monthly meeting until the start of the school year in September, while the market consensus predicted a pause this month before revising its forecasts."

It must be said that Trump's procrastination, about-faces, and other sudden changes in his trade war complicate the equation for the major central banks.

"The upheavals of recent weeks are indeed reinforcing the monetary easing cycle initiated by the major central banks. Donald Trump's recent decisions also raise doubts for the Frankfurt-based European Monetary Fund, which was hesitant to continue its monetary easing program if the Fed had stopped its own. But the Trump administration's announcements are likely to fuel significant economic instability across the Atlantic (2% of US GDP could be levied on private investors), and the Fed is likely to be forced to continue its rate cuts despite inflationary pressures."

Christine Lagarde's comments on the Eurozone's role in the ongoing redefinition of the DNA of global trade will be analyzed by currency traders. While the monetary decision itself is expected at 14:15 pm (EU time), the press conference will begin at 14:45. "This European Central Bank meeting will be held in a highly uncertain context given the turbulence caused by Donald Trump's political decisions and his backtracking. A strict application of customs duties as mentioned by the American president would have a recessionary impact in the United States but also in Europe. It is primarily the confidence of economic agents that is threatened. However, without confidence, there will be less consumption and less investment... Europe is less threatened by an inflationary rebound than the United States, which therefore gives the Central Bank more latitude," explains Emmanuel Auboyneau, Managing Partner at Amplegest.

"Donald Trump's backtracking and the start of negotiations are making the situation less anxiety-provoking, even though many uncertainties remain at this stage. The international situation is forcing Europe to reinvent itself and, at least temporarily, abandon its budgetary dogmas. Germany has voted for a 500 billion euro infrastructure and arms recovery plan. the coming years. At the European level, arms spending will also be undertaken. These decisions, which go against the budgetary doctrine pushed by Germany, are in themselves a small revolution, and the European Central Bank should send a message of vigilance but above all of support in the face of these developments. We still expect two rate cuts by the summer."

Ms. Lagarde's alter ego, Fed Chairman J. Powell, spoke yesterday before the Economic Club of Chicago, noting the beginnings of a slowdown in growth and emphasizing the impact of tariffs, even though these have not yet stabilized, as negotiations are ongoing with many trading "partners." The most outrageous escalation is on the Sino-American front, with tariffs on certain imports reaching up to... 240%!

On the macroeconomic agenda today, the key figures to watch are the ECB's monetary policy decision at 14:15  (press conference at 14:45), as well as weekly jobless claims and the "Philly Fed" index across the Atlantic at 14:30. The main event on Wednesday was the release of retail sales, which rose by 0.5% monthly, slightly above expectations.

Right now, the EUR/USD is trading at $1.1351.

KEY CHART ELEMENTS
The triangle consolidation from April 4 to 9 is now over, with the currency pair having violently broken out to the upside. The energy released is significant, but the ease with which the EUR/USD is shattering resistance suggests a continued upward movement. An accumulation zone between 1.1460 and 1.1674 has been identified, as well as an upside target of $1.1970.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our view is positive on the EUR/USD in the medium term.