Credit Agricole sees more US dollar gains
EURUSD weekly
When it comes to the ECB there is limited scope of a more dovish than expected outcome. If anything central bank Draghi should leave all options regarding a more aggressive stance open if needed. This is regardless of medium-term inflation expectations as measured by 5y inflation swaps remaining close to historic lows.
In an environment of stable rate expectations pairs such as EUR/USD should stay driven by the USD angle. The greenback benefits from its increased safe haven appeal during periods of unstable sentiment. This due to both, the US economy being less impacted by weaker conditions in Europe and constructive domestic conditions leaving limited room of falling Fed rate expectations. It must be noted too, that speculative long positioning remains far from being elevated. As a result to the above outlined conditions we stay in favor of further USD upside.
Without further yield support we would be cautious to extrapolate USD gains into the days ahead although we still like to be long the dollar against the G10 oil exporter currencies NOK and CAD. IMF downgraded global growth again this week and US weekly crude inventory data, out on Wednesday, has recently been oil-bearish.
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