EURUSD post Trump: 2 Key reasons to sell - Citi

Author: Greg Michalowski | Category: News

FX Strategy | CitiFX 

eFX Plus has a post saying CitiFX remains short the EURUSD and they cite 2 key reasons.

As per the commentary:

The Trump vvictory has 1) led to a change in language at the ECB and 2) raised questions as to whether EUR iis a risk positive or defensive currency?

We remain a bearish on EURUSD after last Tuesday's surprise.

First, ECB has softened their tone after the Trump victory.  Concerns on the growth outlook for Europe as well as EU stability have limited a follow-through in the hawkish rhetoric picked up last week.  With December 8 ECB decision still to come – the market will trade in part  off these perceived language changes.

Second, several of Euro's anchors have been questioned after Trump's victory.  Euro zone stability,  European trade and political relations are all longer-term drivers for Europe.  They will change, possibly undermining investor confidence in the macro outlook for 2017/2018. Political risk for Europe is certainly going to rise into 2017 with the Italian referendum, the Dutch, German and French elections.  This tends to be negative for European equity markets, limiting cross-border investment.  And unlike the US, political surprises are unlikely to bring fiscal stimulus.

The short run for EUR is dominated by rate differentials, the medium run by the deteriorating trade outlook in the long run by tail risk  –  both of these end up being EURUSD negative.'

They add that they expect an "orderly move lower, testing the lower bound of the QE range and below but not a precipitous drop sharply lower"

CitiFX added a short EURUSD to its ttechnical portfolio  from 1.09 last week

For other interbank trade and analysis, subscribe to eFX Plus by clicking HERE.
By continuing to browse our site you agree to our use of cookies, revised Privacy Notice and Terms of Service. More information about cookiesClose