Credit Agricole suggests that in less than two months, the European Central Bank (ECB) will likely shift its policy from primarily tightening through rate hikes to tightening through quantitative tightening (QT). They expect this shift in monetary policy mix to be less supportive for the euro (EUR).

Credit Agricole outlines three potential impacts of this shift:

1. It may cause investors to scale back ECB rate hike expectations, which would undermine the EUR's relative rate appeal.
2. It could contribute to credit tightening in the Eurozone, adding to the downside risks to growth.
3. It may drain excess liquidity in the Eurozone, potentially impacting the performance of risk-correlated assets like stocks and peripheral bonds.

In the context of EUR/USD, the bank believes that these developments could solidify market perceptions that the EUR-USD rate spread has reached its peak, particularly if rate markets start to reprice the risk of early Fed rate cuts. Moreover, if QT triggers a renewed widening of peripheral spreads to Bund yields, this could further challenge EUR/USD.