Synopsis:
Credit Agricole sees limited near-term upside for EUR/USD, as the short squeeze appears to have run its course. A still-weak Eurozone outlook, upcoming ECB commentary, and already-aggressive Fed rate cut pricing could weigh on further euro gains. US tariff developments and inflation data remain key risks for FX markets.
Key Points:
1️⃣ EUR/USD Rally Losing Momentum 📉
- Market short positioning has largely unwound, reducing upside pressure.
- Further euro gains may be limited without a fresh catalyst.
2️⃣ ECB-Speak Could Reinforce Eurozone Weakness 🇪🇺
- Policymakers may highlight continued economic headwinds.
- This could discourage further EUR buying.
3️⃣ Fed Rate Cut Expectations Already Well-Priced 🏦
- Markets anticipate three Fed cuts in 2025.
- Only a weak CPI print or dovish Fed commentary could push USD lower.
4️⃣ US Tariff Developments Remain a Key FX Driver 🌍
- Further tariff announcements could add volatility to currency markets.
Conclusion:
Credit Agricole sees a scope for EUR/USD to stall in the near term, with euro upside limited by fading short positioning, a weak Eurozone outlook, and already-priced-in Fed easing. Market focus now shifts to US inflation data and tariff policy for the next major FX move.
