Synopsis:

The ECB's 25bp rate cut, weak Eurozone economic data, and rising expectations for deeper easing are weighing on the EUR. With markets pricing in 80bp of cuts in 2025, ANZ sees scope for 150bp of total cuts, adding further downside pressure on EUR/USD. Given uncertainty around Trump’s policies and negative EUR sentiment in positioning data, a break below 1.03 is increasingly likely.

Key Points:

1. Weak Eurozone Growth & ECB Dovishness:

   • Q4 GDP stagnated (0.0% q/q), with Germany (-0.2%) and France (-0.1%) contracting.
   • Lagarde emphasized disinflation and growth concerns, reinforcing rate cut expectations.

2. Markets Pricing More Easing Ahead:

   • The market currently expects 80bp of cuts in 2025, but ANZ sees room for 150bp.
   • This divergence could weigh on the EUR further.

3. Upcoming Risk Events:

   • Eurozone CPI & retail sales data next week could confirm economic softness.
   • US policy uncertainty under Trump remains a key wildcard.

4. Positioning & Technical Risks:

   • CFTC data shows a growing net short EUR position, amplifying downside pressure.
   • EUR/USD risks falling below 1.03 in the near term.

Conclusion:

The EUR remains vulnerable amid weak data, a dovish ECB, and negative positioning sentiment. With further rate cuts expected and US trade risks looming, EUR/USD could break below 1.03 soon.