Currencies of the banks were the same.

The American dollar reiterated the fate of the single European currency. First, it seriously sinks after the meeting of the Central Bank and then quickly regaining lost positions. During their March meetings, both the ECB and the Fed looked "dovish" to investors. However, if the EUR/USD pair rises after a false breakdown on the lower limit of the medium-term consolidation range of 1.125-1.15 was due to the belief that the eurozone felt the bottom then the rally in the USD index is associated with problems European economy.

After lowering FOMC forecasts for US GDP from 2.3% to 2.1% in 2019 and at the federal funds rate, the market finally believed that the monetary policy normalization cycle was over. In December, only two members of the Committee believed in keeping the rate at the level of 2.5% in the current year. This changed in March with eleven of them now. CME derivatives believe that the Fed will resort to monetary expansion with a probability of almost 45%. Expectations of monetary policy easing are a weighty argument in favor of currency sales but before getting rid of the US dollar, you need to think about how to replace it in the portfolio.

Theoretically, it could be the euro. The de-escalation of the US-Chinese trade conflict gives hope for the recovery of European exports and leaving in the shadow of temporary difficulties allows us to count on the growth of domestic demand. In fact, the purchasing manager indices signal that the negative has not yet been exhausted. Business activity in the manufacturing sector of the currency bloc fell to its lowest level since 2013 while the dynamics of the service sector leaves much to be desired. According to Markit, the current PMI values are equivalent to GDP growth of 0.2% q/q in the first quarter. This is not the figure that the bulls were counting on the EUR/USD pair.

Dynamics of European business activity

It seems that European companies are not sure about the end of the US-Chinese trade war and they fear that the United States will impose import duties on the supply of cars from the Old World. Indeed, the conflict between the two largest economies in the world has not been exhausted. According to Bloomberg, Beijing is not pleased with the fact that Washington will not lower tariffs in response to the concessions from the Middle Kingdom. Donald Trump exacerbates the situation when he said that the duties of $ 250 billion will remain in force after the signing of the agreement. Say, you need to control how the Celestial performs its conditions.

There is no certainty about Brexit. Bloomberg estimates that about 2.5% of EU GDP is impacted by exports to Britain. Breaking ties will slow the European economy even further. It is not surprising that in such circumstances both of the GBP/USD and EUR/USD pairs move quite synchronously.

The key event of the week by March 29 for the US dollar will be the release of data on US GDP for the fourth quarter. According to Morgan Stanley, the second estimate due to the loss of steam from consumer incomes and activity is likely to be reduced from 2.6% to 1.8% q/q, which is bad news for the bears in EUR / USD. Technically, only a repeated rebound from the support at 1.125 followed by the formation of the "Head and Shoulders" pattern will leave the bulls hope for a rematch.

EUR / USD daily chart