Credit Agricole CIB Research discusses EUR/USD outlook from the flows perspective and expects the unhedged inflows into the Eurozone stock markets to resume in the coming months and help the EUR to advance through the coming months.
"EUR portfolio inflows slowing but not reversing. Recent data has suggested that both unhedged and hedged ETF Eurozone stockmarket inflows have slowed down considerably of late. And while the inflows into the US stock-market ETFs did not fare much better, the cumulative impact seemed to be EUR/USD negative," CACIB notes.
"We believe that this will remain a theme in the coming months and quarters with portfolio inflows offsetting or even outweighing any portfolio outflows from the Eurozone. Indeed, we expect that the second Covid-19 wave will only have a temporary impact on the Eurozone recovery so that foreign equity inflows could resume in the coming months, CACIB adds.