MUFG Research discusses EUR/USD outlook and maintains the view of a temporary short-term correction in the near-term.
"The IFO Business Climate Index advanced further yesterday showing Germany continues to lead the way in recovering from the pandemic hit. The index is just 3ppts from the pre-pandemic level and now this additional support for the labour market will provide further support for recovery," MUFG notes.
"We have been highlighting the prospect of some EUR correction lower with some indicators indicating EUR/USD is now stretched. Equally though, the favourable macro backdrop does also suggest that corrections to the downside are unlikely to be extensive or sustained," MUFG adds.