EUR/USD is currently trading around the 1.09 level. What is the outlook for the pair?
Here is their view, courtesy of eFXdata:
Bank of America Global Research maintains a bearish and short EUR/USD exposure targeting a move towards 1.05.
The Schrödinger’s cat experiment resembles the dichotomy that we find today between the state of the economy and some asset prices, in particular US stocks. A natural question is then: how can we reconcile this decoupling between asset prices and expectations? We think the most powerful element to explain the decoupling is the reaction function of the Fed (and admittedly of many other major central banks, including to some extent the ECB) and the expectation that this reaction function will remain unaltered in the future,” BofA notes.
“From the above, we can conclude that the risk-reward of being long US stocks does not appear as particularly attractive...We remain skeptical that the Franco-German package will be the first step towards something much bigger like a Eurobond. We think the market is reading too much from the announcement. Coupled with a very weak outlook for the Eurozone, the limits that not only fiscal policy but the ECB might have down the road, periphery sovereign risks and extended long positioning, we like to express our bearish view by selling EURUSD,” BofA adds.
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