EUR: Spec Positioning Turns Positive; Sell Rallies - Credit Agricole

Irrespective of medium-term inflation expectations as measured by 5Y inflation swaps remaining close to historic lows, there seems to be limited scope of the ECB turning more aggressive. Even if central bank President Draghi said this week that they will not surrender to excessively low price growth and as the central bank’s Chief Economist Praet outlined that they are willing to do whatever is needed to return inflation back to target, it was indicated too that measures would be recalibrated should further shocks emerge.

However, when considering that speculative EUR long positioning is now positive, fresh buying may be needed to make a case of a further appreciating currency.

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For that to happen rising ECB rate expectations may be needed, something we do not anticipate. As such we believe that rallies should still be sold.