Citi discusses EUR outlook into this week's ECB December policy meeting.
"CitiFX Strategy maintains its medium-term EURUSD bullish bias with a target of 1.30, based on cyclical recovery, the search for value, diversification and changes in hedging and funding patterns.
This week though, the team is neutral for EURUSD until the ECB Meeting which we expect to be dovish, seeing an upsizing PEPP purchases by at least EUR500bn and an extension of a series of other measures, such as the APP and LTROs, tiering and reinvestment as part of its recalibration," Citi notes.
"For FX, we expect the ECB to deliver a message similar to its September meeting that “EUR appreciation and its impact on inflation are being carefully watched”. However, importantly, we don’t think the ECB will consider rate cuts. EU budget talk continues and we believe an agreement will eventually be found, possibly into this week’s EUCO Summit," Citi adds.