The pound has been suffering because of a potential “Brexit” and the euro has suffered low inflation, but the Brexit trade also affects the euro. What does this mean going forward? Here is the view from Credit Agricole:
Here is their view, courtesy of eFXnews:
EUR moved in sympathy with the beleaguered GBP as market fears grew that a Brexit-could strengthen the centrifugal forces in the EU before long.
It doesn’t help the EUR that the ECB remains on course to deliver more aggressive easing as soon as March, cementing the currency’s status as a funding currency. Growing political risks in the EU, and slowing global trade and growth will continue to weigh on business sentiment in the Eurozone as highlighted by the weaker ifo.
All that should keep pressure on the ECB to ease further from here. Despite all that, there seemed to be very little appetite for EUR shorts in the market with investors having aggressively cut their downside bets in recent weeks. This could suggest that crowded market positioning need not stand in the way of continuing the selloff in EUR.
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