Credit Agricole CIB Research adopts a sell-on-rallies bias on EUR/USD over the coming weeks.
"In the immediate aftermath of the Russian invasion into Ukraine on 24 February, a gap opened between market measures of risk appetite like (inverse of) our FX risk index and global PMIs – that remained quite buoyant despite the triple threat emanating from geopolitical, stagflation and monetary tightening risks. Since then, the gap has started closing mainly because of the recovery in risk assets we have seen in recent days," CACIB notes.
"We continue to believe that, despite its recent recovery, the EUR should remain a sell on rallies around current levels. The USD could re-emerge as the high-yielding safe-haven king of G10 FX," CACIB adds.