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.”
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