EUR/USD has been marked by strong volatility. What are the near-term and long-term outlooks for EUR/USD?
Here is their view, courtesy of eFXdata:
Credit Agricole Research discusses EUR/US outlook and expects range-bound consolidation in the near-term.
“The European governments’ response to the Covid-19 pandemic has been aggressive and has subsequently pushed their capacity for fiscal stimulus to the limit. This has recently led to renewed widening of the BTP-Bund yield spread, which in turn led to an “intervention” by the ECB to contain and ultimately reverse the market fragmentation. For the EUR, such a development would help address one major weakness of the single currency – the fact that it is not backed by a single government security underwritten by all of the Eurozone Treasuries. Such an asset could over time become an appealing alternative to USTs,” CACIB notes.
“In turn, FX reserve diversification flows could prop up the EUR vs the USD over the long term. In the near term, the focus will be on this week’s March flash HICP estimate and the final PMI prints. While the risk of a disappointment is non-negligible, EUR/USD could remain resilient, especially if weaker US data undermines the USD in the coming days,” CACIB adds.
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