MUFG Research discusses the EUR outlook into this week's ECB meeting. MUFG is short EUR/USD in its ToTW portfolio targeting a move towards 0.9760.
"We maintain a bearish outlook for the EUR, and a short EUR/USD trade position. The main upside risk to our trade idea in the week ahead would be if the ECB delivers more front-landed tightening by hiking rates by 50bps, and the ECB’s anti-fragmentation policy tool plans are viewed favourably by market participants," MUFG notes.
"In contrast, if the ECB’s anti-fragmentation policy tool plans disappoint and/or Italy moves closer to an early election, the fundamental case for a weaker EUR would be reinforced," MUFG adds.