Synopsis:

ANZ provides a cautious outlook on the EUR/USD, maintaining a neutral to bearish stance while highlighting upcoming PMI data from Germany and France as potential catalysts for movement. The bank emphasizes the significance of economic indicators from Europe's largest economies in determining the euro's trajectory against the dollar and other G10 currencies.

Key Points:

• Focus on Major European Economies: The forthcoming PMIs from Germany and France are particularly crucial. These economies have shown lagging performance in both manufacturing and services sectors compared to smaller EU countries. A strong showing in these PMIs could be pivotal for the euro's recovery on the broader FX landscape.

• Current Positioning: ANZ expresses reluctance to adopt a long position on the EUR across most currency pairs, except for EUR/CHF. This exception is due to the Swiss National Bank's (SNB) preference for a weaker Swiss franc.

• EUR/USD and EUR/GBP Outlook: The bank maintains a neutral to bearish view on EUR/USD and EUR/GBP. For EUR/USD, the downside risk is seen as limited to a floor of around 1.05 in the near term, unless the PMI data released next Tuesday significantly underperforms expectations.

• Economic Divergence in the EU: ANZ notes ongoing concerns about the disparity in economic recovery rates between major and minor EU economies. This bifurcation could continue to dampen the euro's prospects in the medium term unless major economies like Germany start showing more robust signs of recovery.

Conclusion:

'ANZ signals cautious optimism that forthcoming PMI data from Germany and France could temporarily boost the EUR, especially if the indicators exceed expectations. However, the broader outlook for the euro remains guarded, with structural economic disparities within the EU posing ongoing challenges. Investors and traders should closely watch the upcoming PMI releases, as they will likely be key drivers of the EUR's performance in the near term.