Synopsis:

Credit Agricole attributes the recent underperformance of EUR/USD primarily to month-end flows, with the USD showing renewed resilience.

Key Points:

1. Month-End Flows: The latest movements in EUR/USD are seen as a correction driven by month-end currency flows. These flows have contributed to the USD’s ability to recover some recent losses.

2. USD Resilience: The recent strength of the USD, despite its earlier oversold and undervalued state, is interpreted as a response to month-end FX flows rather than fundamental shifts.

3. Calm UST Markets: US rates and Treasury markets have remained stable, reinforcing the view that the recent USD strength is more about temporary market adjustments than broader economic changes.

Conclusion:

Credit Agricole concludes that the recent EUR/USD underperformance is mainly due to month-end flows, with the USD's recent rebound being a reflection of these temporary dynamics rather than a shift in underlying fundamentals.