Synopsis:

BNP Paribas highlights striking similarities between the current market setup and the 2017–early 2018 EUR/USD surge, suggesting that history could repeat with a sizeable euro rally—even if it’s not the base case.

Key Points:

• EUR/USD rose from 1.05 to 1.25 in 2017–2018, despite diverging front-end rate differentials. BNP sees similar dynamics forming now.

• The market is structurally short EUR, particularly via European equities (vs. bonds in 2017), leaving room for a positioning squeeze.

• Eurozone growth expectations are improving relative to the US, adding to EUR’s support.

• A ceasefire in Ukraine could offer an additional bullish catalyst for the euro.

• In 2017, FX volatility dropped while EUR risk reversals rose—a pattern BNP expects to recur.

Conclusion:

While not BNP’s central forecast, the 2017 analog offers a meaningful upside risk for EUR/USD. With improving growth dynamics, geopolitical de-escalation potential, and stretched positioning, a repeat of the last euro bull cycle remains a credible bullish scenario.