Remarks for analysts at Bank of America on the euro, the Federal Reserve and the European Central Bank:
- As long as global and especially US inflation remain high, EUR/USD is likely to stay weak, with further downside potential during the inevitable hard landing.
- A sustained rally in EUR/USD would require a shift in the Federal Reserve's stance, while for now, the carry trade is also exerting downward pressure on the EUR.
- While non-USD EUR crosses can remain strong, further upside may be limited. In the long term, EUR strength will depend on the ECB's increasingly difficult commitment to the inflation target compared to the rest of the G10.
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Today's rally in EUR/USD is an illustration of how tightly bound the rate is to expectations for the FOMC. Jobless claims data Thursday shunted us back to 'on hold' expectations. We aren't a fickle bunch, are we?
