Credit Agricole CIB Research discusses the EUR outlook and sees a limited scope for further upside in the near-term.
"The EUR’s recent recovery is closely linked to the persistent inflation overshoot in the Eurozone and the ECB’s stated desire to push against any further EUR depreciation as a way to contain imported cost-push inflation. . That being said, we note that the Eurozone rates markets are already pricing in the start of the ECB tightening cycle in July as well as close to 100bp of hikes by the end of the year," CACIB notes.
"This suggests that some if not all positives are in the price of the EUR while some downside risks remain. We further note that the EUR is also the second biggest long in the G10 FX market at present according to our positioning indicator while EUR/USD is looking slightly overvalued according to our FAST FX fair value model," CACIB adds.