Danske Research discusses EUR/USD outlook and maintains a structural bearish bias over the coming months.
"An ECB sources story yesterday drove afternoon volatility in FX markets with EUR/USD almost dropping a full big figure amid EUR fixed income overperforming peers. While we find the communication odd at this stage the sheer size of the spot move does illustrate the large sensitivity of the cross to "negative" news. We have been wrong in our tactical call so far this year on Eurozone asset underperformance and a re-tightening of financial conditions. This has contributed to sending EUR/USD sharply higher," Danske notes.
"Meanwhile, we still stress that our strategic framework for analysing FX markets suggests eventual downside to EUR/USD. Yesterday's ECB story should only mark an additional source of concern for EUR bulls in our view," Danske adds.