While EUR/USD is trading in somewhat lower ground, it hasn’t gone too far.
Nevertheless, Credit Agricole sees another sell-off of euro/dollar in the next few weeks. Here’s why + targets:
Here is their view, courtesy of eFXnews:
The EUR has been broadly range-bound over the past few weeks, mainly due to relatively stable policy differentials.
As the ECB has repeatedly reaffirmed that QE will run its course, it will be down to further rising Fed rate expectations to enable the pair to break through the past few weeks’ trading range.
Despite Fed Chair Yellen and central bank member Lockhart making a stronger case for higher rates as soon as September, investors still seem to doubt their readiness to act.
Still-weak price developments, the dampening impact of a stronger USD on inflation expectations and/or continuing uncertainty regarding global growth conditions seem to be driving this sentiment.
However, as a further improving labour market should ultimately lead to accelerating price developments, and given medium-term inflation expectations have remained strongly supported of late, we remain of the view that the Fed will indeed start to tighten monetary policy in September.
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