Credit Agricole CIB Research discusses the EUR outlook and maintains a neutral bias in the near-term.
The EUR rally at the start of the new year has lost momentum with the build-up in market longs going into reverse in recent weeks. On a more global level, the relative underperformance of the single currency could reflect a renewed demand for EUR-funded carry trades. Indeed, the EUR’s yield disadvantage remains quite significant in a cross-country comparison and the dovish ECB outlook seems to suggest that this will be the case for the foreseeable future," CACIB notes.
"Caution is warranted in our view, given the risk of weaker-than-expected business sentiment data and further official verbal intervention in the EUR... We therefore maintain a relatively neutral near-term outlook on the EUR," CACIB adds.