Nordea Research discusses EUR/USD outlook and maintains a tactical bearish bias into year-end.
"The Euro area macro picture is in make it or break it territory. The market has already concluded that the Euro-area PMI outlook has bottomed out. If you ask Sweden, that is not the case by any means. We are still tempted to remain short EUR/USD, as it will wrong-foot a lot of market participants (and the ECB for that matter), if the Euro area PMI outlook doesn’t start to improve," Nordea notes.
"The USD needs to weaken materially before the world is really out of the woods, and we are not yet really convinced of that narrative. Most big IBs got off to a bad start on their calls for a negative “turn-around” in the USD outlook over the past 2-3 weeks. We like to be contrarian on the “USD cycle is turning” bet another while (target 1.08-1.09 range in EUR/USD) as it e.g. usually takes in between 2 and 4 months from a USD liquidity addition to the actual pass-through to a weaker USD," Nordea adds.