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Monday, June 21, 2021

Two reasons to remain skeptical about the EUR/USD rally

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What’s driving the move in the euro

What's driving the move in the euro

EUR/USD is up 56 pips to 1.2137 todabu but Credit Agricole CIB Research remains skeptical that the recent EUR/USD rally can be sustained in the near-term.

“For starters, we think that, come June 10, the recent tightening of the Eurozone financial conditions could tilt the balance of risks towards a delay of the PEPP taper beyond Q3,
especially as the Governing Council tries to avoid further EGB yield
spikes during the relatively illiquid summer period,” CACIB notes. 

At the same time, improving US growth and inflation data could push UST yields closer to their March high.
As a result, we think that the long-term EGB-UST yield spread will turn
more negative again and weigh on EUR/USD,” CACIB adds.

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