ECB QE recalibration; what's the trade? - Credit Agricole
Credit Agricole on what's next for the euro
Credit Agricole CIB FX Strategy Research notes that as Eurozone political risks have been abating of late, investors are refocusing their attention on improving Eurozone data and the forthcoming October ECB meeting.
"While uncertainty about Catalonia and Italy may linger, such fears should not derail the EUR uptrend.
We expect the ECB to announce details of its tapering programme at the upcoming policy meeting on 26 October...We expect that the ECB QE taper will have a positive impact on both EUR and EGB yields, especially if the Governing Council opts for a more aggressive reduction to the pace of its asset purchases.
Higher EGB yields should attract renewed portfolio flows and, together with continuing inflows into Eurozone stock markets, prop up EUR.
In line with this view, CACIB recommends long EUR vs USD, JPY and CHF.
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