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Aug 31 - 06:55 PM

EUR/USD: To Stabilize Further On A Partial Reversal Of Fed-ECB Policy Divergence - Credit Agricole

By eFXdata  —  Aug 31 - 03:00 PM

Credit Agricole CIB Research discusses EUR/USD and sees a scope for further stabilization over the coming months.

"We expect that the Fed’s ‘patient’ approach towards QE taper will remain a drag on the USD in the near-term. EUR/USD in particular could benefit given that one of the strongest headwinds for the pair has been the growing policy divergence between the dovish ECB and the increasingly hawkish Fed. A partial reversal of this divergence could be under way after the Fed Chair Powell has made a clear distinction between the upcoming gradual QE taper and any future Fed tightening via rate hikes and/or quantitative tightening," CACIB notes. 

"The prospect for stable and historically low US rates for longer can stop the EUR-USD rate spread from dropping significantly further into negative territory in coming months and thus help EUR/USD stabilise," CACIB adds. 

Source:
Crédit Agricole Research/Market Commentary

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