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Positioning is no longer a drag on the euro, but the adverse trend from rising US rates/yields, and the ongoing upgrade of US growth forecasts while European ones languish, suggest the euro isn’t out of the woods just yet, Kit Juckes from Societe Generale reports.  

EUR/USD and growth expectations, rates, positions: Still under pressure  

“The 2021 US growth consensus has risen from 5% to 5.7% since last month, while EZ consensus has stayed at 4.2%. But this ought to be as bad as it gets for Europe.”

“2-yr EU-US rate differentials are 10bp wider in the last month, 10yr yield spreads nearly 20bp wider and the 2y2y real rate differential is 30bp wider.”

“CFTC positioning does show progress, which is more than can be said for the two previous charts. The euro no longer looks quite so scarily overbought on this basis.”