By eFXdata — Jan 24 - 09:30 AM
Synopsis:
ANZ sees limited upside for the EUR/USD and considers any move above 1.05 as a good opportunity to re-enter short positions. Growth risks and diverging monetary policies between the euro area and the US continue to weigh on the euro.
Key Points:
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Growth Risks in the Eurozone:
- Germany’s ZEW survey indicates persistent economic pessimism, with subdued current conditions and declining future growth expectations.
- PMIs and Q4 GDP figures this week are likely to underscore the euro area’s economic vulnerabilities, especially if there’s a stark contrast with US data.
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Yield Spread Limitations:
- While EUR/USD has diverged somewhat from yield spreads due to tariff risks, the divergence is marginal and points to limited upside for the EUR.
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Central Bank Divergences:
- Differences in FOMC and ECB messaging during upcoming central bank meetings may further highlight monetary policy contrasts, capping EUR/USD gains.
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Positioning Normalization:
- While the pair could consolidate as positioning normalizes, upside moves are seen as opportunities for shorts, especially above the 1.05 level.
Conclusion:
ANZ remains bearish on the euro near-term, citing weak euro area growth prospects and policy divergences with the US. They recommend re-entering outright short EUR/USD positions on any move above 1.05.
Source:
ANZ Research/Market Commentary