CA: 5 reasons NOT to sell EUR/USD
Analysts Credit Agricole advise against selling EUR/USD around the current levels for 5 reasons:
- Despite the recent dovish rhetoric of the ECB, there’s little scope for policy intervention any time soon, so investors are likely to keep European rate expectations elevated in coming months.
- German rates may rise further on improving German growth prospects.
- Cross-border capital flows should remain supportive for EUR/USD.
- Fed September QE tapering expectations need not produce USD appreciation: the correlation of the greenback with US yields has been decreasing so far.
- There’s risk that FOMC policymakers could feel the need to undertake more aggressive forward guidance to compensate for the effects of tapering. This scenario could further undermine USD, lifting EUR/USD.