Credit Agricole CIB Research discusses EUR/USD outlook and sees the pair is slightly cheap around current levels.
"There are a number of drivers behind the EUR’s sudden fall from grace. In the case of EUR/USD, we had the reassessment of the Fed outlook in the wake of last week's Non-farm payrolls that boosted the USD rate advantage across the board and led to the renewed compression of the EUR-USD rate spread...These moves have been too contained to explain the recent EUR collapse, however. Indeed, our FAST FX model is suggesting that the EUR/USD short-term fair value should be closer to 1.08 than 1.07," CACIB notes.
"We think it is too early to conclude that a more lasting deterioration in EUR sentiment lies ahead. It would take a more persistent Eurozone data weakness, a dovish ECB and/or even wider peripheral spreads to justify a renewed downtrend in the EUR," CACIB adds.
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