Credit Agricole: investors have moved away from Greece. Is it time to sell EUR/USD again?
"This could be due to lingering uncertainty about the deal. Indeed, various media reports have highlighted creditors' concerns that the new proposal is putting too much emphasis on new taxes (on both businesses and households) to balance the books. Excessive taxation could hamper the Greek economic recovery and make the proposal less credible," notes Credit Agricole
"In addition, there are concerns that the proposed VAT and pension reform could erode the support from Syriza's main coalition partners - the Greek Nationalist - when the measures are put for a vote in the Greek parliament," Credit Agricole adds.
"While investors' cautiousness could explain some of the recent EUR underperformance, the contrasting response of the FX and the European stock and peripheral bond markets may also indicate that investors have moved away from Greece to re-focus on the lingering policy divergence between the increasingly hawkish Fed and persistently dovish ECB. Indeed, a Greek resolution will arguably make it easier for the FOMC to hike rates as soon as September. At the same time, the ECB remains very committed to QE and this should continue the make the EUR an attractive funding currency," Credit Agricole argues.
"The above could suggest that EUR/USD could be offering attractive selling opportunity at current levels."
