EUR/USD is trading in the same old range. What’s next?
Here is their view, courtesy of eFXdata:
Credit Agricole CIB Research discusses EUR/USD outlook and argues that firm fundamentals rather than political uncertainty should prove the single currency’s predominant driver. CACIB expresses this constructive EUR view via staying long EUR/USD targeting a move towards 1.1950.
“The EUR has been broadly stable, regardless of continuing uncertainty regarding Italian politics. While position-squaring on the back of weaker global risk-sentiment has seemingly benefited the EUR, we expect its attractiveness as a funding currency to continue falling given the expected drop in its rate advantage,†CACIB notes.
“As such, we expect the ECB to start normalising monetary policy without undue delay. Headline risk with respect to Italy should stay high, but contagion is proving limited and hence the solid Eurozone fundamentals should direct the ECB’s stance. Note too that speculative short positioning seemingly remains elevated, suggesting that many negatives in terms of politics are in the price. We remain long EUR/USD as a trade recommendation,†CACIB adds.
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