EUR/USD is shaking and rolling on Greek headlines today as finance ministers meet in Riga. Optimism sent the euro up while reports about heated discussions reversed the moves.
The team at Credit Agricole asks us to refocus on more important drivers of the common currency and explains why selling the rallies is a good tactic:
Here is their view, courtesy of eFXnews:
The EUR has been in demand of late, mainly on the back of rising expectations of officials getting closer to a deal for Greece.
In that respect today’s focus will be on the Eurogroup meeting, as part of which we do not expect a final resolution. If so, investors will increasingly focus on the upcoming Greek payments to the IMF on May 1 and 12 totalling EUR970mn.
However, regardless of conditions in Greece we expect the single currency to remain mainly driven by ECB monetary policy expectations. As confirmed by the latest data business activity has been slowing for several euro nations. This in turn suggests that the risk is for further slowing price developments. Under such conditions the ECB remains in a position to keep an aggressive monetary policy stance to the detriment of the EUR.
As a result to the above outlined conditions we remain of the view that EUR rallies should be sold, in particular against the USD.
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