By eFXdata — May 17 - 08:54 AM
Credit Agricole reports that the Euro (EUR) has started to consolidate against the USD and GBP, appearing undervalued according to their short-term fair value model, FAST FX. This perceived undervaluation has attracted some buyers, and aligns with the fact that the EUR is trading at a discount relative to its rate differential vs the USD and GBP.
However, Credit Agricole expresses doubts about a significant EUR rebound, especially against the USD, due to several reasons:
- The EUR-USD rate spread has peaked, and the bank expects it to lower as markets reassess their dovish outlook for the Federal Reserve.
- Recent data disappointments from the Eurozone have indicated growing stagflationary risks, particularly in Northern Europe.
- Positioning data suggests that the EUR is still very overbought against the USD, and to a lesser extent, the GBP.
These factors could limit the potential for a substantial rise in the value of the EUR in the near future
Crédit Agricole Research/Market Commentary