Danske Research discusses its expectations for this week's ECB policy meeting on Thursday.
"For EUR/USD, this week's focus will be ECB, the release of PMIs and broad dollar momentum. On the latter, we think tactical momentum is getting stretched negative. At the last meeting, ECB's optimism did spill over to EUR but given also the recent rally in spot from 1.17 to nearly 1.20, we would argue there is less scope to turn the tactical story even more positive," Danske notes.
"On net, we think that optimism towards the euro area is well priced in to inflation- and earnings expectations as well as FX. That said, if the discussion on PEPP drives European yields higher, we could see some effect on spot fx too," Danske adds.