Bank of America Global Research highlights the importance of the ECB Strategy Review for the EUR direction over the remainder of the year.
"The ECB communication remains problematic. Recent comments by ECB hawks point to risks of early policy normalization...All this may reflect the discussions behind closed doors during the Strategy Review that is supposed to conclude this summer...Lagarde may try to balance the opposing views in the Strategy Review, leading to even more confusion about the policy reaction function," BofA notes.
"For now, we have to wait for the Strategy Review, in order to get some clarity. As we have argued before, the Review itself can go either way. It is succeeds, it should clarify how an open-ended QE program can continue after the PEPP ends early next year. In the other extreme, the end of the PEPP will signal the end of QE. Where we end up in the middle of these extremes will determine the EUR impact," BofA adds.