Societe Generale Research discusses the EUR outlook and notes that EUR/USD currently tracks BTP/Bunds better than relative rates.
"Sometimes the euro behaves like a ‘normal' currency, rising when there's increased optimism about the economy, when (German) bond yields are rising relative to those elsewhere and when recycling a gargantuan current account surplus is difficult. At other times, it's performance measures the degree of angst about its structural flaws, and its moves correlate with the spread between (low-risk) Bunds and other higher-yielding bonds," SocGen notes.
"EUR/USD is likely to test 1.12 and EUR/JPY remains a core short...A soggy euro and another week of Brexit talks leave GBP/USD vulnerable. Lack of progress on reaching a deal with the EU is going to see ‘no-deal' fears grow," SocGen adds.