Credit Agricole CIB Research discusses the EUR outlook and flags a scope for further consolidation in the near-term.
"Ahead of next week’s PMI data, the EUR remains overbought while the ECB’s jawboning continues ...The EUR has been sidelined of late with market focus shifting to topics like the USD selloff vs Asian currencies as well as Brexit. That said, it seems that the combined effect of the recent ECB jawboning and a persistent overhang of EUR longs in the FX market has contributed to the latest lacklustre performance of the single currency especially vs the likes of the JPY and the GBP.
Looking ahead, we believe that the market focus will be on the upcoming PMI data out of the Eurozone as well as the German ifo for the month of September. With the Eurozone recovery having lost some momentum over the summer and with new Covid-19 cases continuing to grow across Europe, FX investors want to know if this was only a temporary setback or the beginning of a more protracted slowdown. In our view, it would take positive surprises from the data to boost the outlook for the EUR," CACIB adds.