Danske Research maintains a bearish bias and short long-term exposure in EUR/USD.
"The Fed is the most important in our view when it comes to central bank liquidity because of the importance of USD liquidity for global financial markets and the economy. Tighter USD liquidity conditions are coming. The ECB is likely to start tightening EUR liquidity conditions, but we doubt it will be as materiel as the Fed. The EUR/USD RFR basis curve prices more expensive USD liquidity, but it has further to go in our view," Danske notes.
"The 1Y tenor could widen a further 20-30bp, which would further add to carry on short EUR/USD positions. From a carry perspective, it supports our still bearish view on EUR/USD spot," Danske adds.