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EUR/USD managed to move  a bit higher in a week that saw not so convincing euro-zone news but much bigger disappointments from the US.

Is Greece the reason to sell?  Not exactly, but Barclays has a conviction to be short at current levels. Here is why:

Here is their view, courtesy of eFXnews:

Despite the lack of material progress between Greece and its European creditors, the EUR has been rather resilient.

Yet, Barclays Capital notes that market sentiment towards Greece remains fragile and as such continues to expect the EUR to exhibit a high beta to political developments both on the upside but higher so, on the downside.

“The cash troubles for Greece are likely to remain in the coming weeks and the next official check point includes the payment of €1.8bn in wages and pensions at the end of April and the €200mn IMF interest payment on 1 May,” Barclays argues.

“The next scheduled Eurogroup meeting is on 11 May but we do not exclude the possibility of an intra-meeting Eurogroup, if one proves necessary,” Barclays adds.

Greece aside, FX market participants are likely to re-focus on data next week.

“We forecast euro area “flash” HICP inflation (Thursday) to have edged up to 0.0% in April from -0.1% previously and core HICP inflation to have increased to +0.7% from +0.6%, with downside risks attached to our call. Moreover, we expect German retail sales to moderate further (-0.2% m/m: consensus: 0.4% m/m) and look for a further pick-up in money growth, M3 and a normalization of bank lending flows (Wednesday),” Barclays projects.

All in all, Barclays thinks that low inflation and subdued inflation expectations are expected to keep the ECB committed to successfully completing its QE program at least until September 2016, adding downward pressure to the EUR.

On the USD front, Barclays notes that it’s a blockbuster week in the US with the FOMC meeting (Wednesday) and key data releases – consumer confidence (Tuesday), advanced estimate of Q1 GDP (Wednesday), Chicago PMI (Thursday), ISM manufacturing (Friday).

We expect the FOMC statement to likely convey that the committee views data in Q1 as an aberration and sees economic growth proceeding at a moderate pace. A more constructive Fed is likely to support the USD as well as weigh on risk appetite, in our view. Our rates strategists maintain the view on front to intermediate curve flatteners,” Barcalys projects.

We expect economic data to be roughly neutral for the USD. We are in line with consensus on Q1 GDP (Barclays and c.f.: 1% q/q saar), slightly below consensus on consumer confidence (102.5 vs. c.f. 103) and Chicago PMI (50.0 vs. 51.0) and slightly above on ISM manufacturing (52.0 vs. c.f. 51.0),” Barclays adds.

We re-iterate our conviction in being short EURUSD at current levels,” Barclays advises.

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