Credit Agricole CIB FX Strategy Research discusses EUR/USD outlook, and argues that the demand for USD-liquidity into year-end won't likely be reflected in a weaker EUR/USD.
"The aggressive widening of the EUR-USD cross currency basis swap spreads is also a relatively recent phenomenon that does not necessarily reflect significant FX spot flows….Its impact on EUR is questionable, however. Indeed, we expect that any USD-scarcity to impact mainly leveraged positions in risk-correlated and carry currencies that are funded in USD.
It also may be too early to expect that the correlation between EUR and EUR rates will be reinstated anytime soon," CACIB argues.
In line with this view, CACIB Research remains long EUR/USD* from 1.1770 targeting 1.22.
Source: Credit Agricole CIB ResearchOriginal Article
