Credit Agricole CIB Research discusses the EUR outlook ahead of next week's ECB policy meeting.

"The EUR has emerged as one of the biggest beneficiaries from the USD selloff so far in 2023 due to the growing divergence between the hawkish ECB policy outlook and the increasingly dovish Fed outlook. We note, however, that the EUR is now the biggest long in G10 FX markets and that the EUR is looking expensive vs the USD and GBP according to our fair value models," CACIB notes.

"We further believe that next week’s ECB meeting may do little to trigger further widening of the EUR-USD rate differential and thus offer more fundamental support to EUR/USD as (1) the Governing Council should remain data dependent; and (2) we continue to expect the ECB rates to peak at 3.75% suggesting that most of the tightening could already be behind us," CACIB adds.