German IFO survey data for February was significantly weaker than expected, with the business confidence indicator falling to 105.7 and the expectations index to 98.8, notes BNP Paribas.
"This is consistent with the downward surprise to yesterday’s eurozone PMI data, where the composite measure fell to a 1-year low. While our base case is that Q1 eurozone growth remains at the 0.3% q/q pace seen in Q4 2015, recent survey indicators point to an increasing risk of a lower number.
This supports our economists’ expectations for bold ECB action on the 10th of March. ECB’s Nouy and Costa are scheduled to speak but we think eurozone monetary policymakers will continue to avoid an excessive build-up of easing expectations similar to the December episode which lead to market disappointment with actual ECB policy action," BNPP argues.
"We continue to see opportunities to sell EUR on the crosses, noting that in light of extreme short GBP positioning (-41 on a +-50 scale according to BNP Paribas Positioning Analysis), EURGBP’s risks are skewed to the downside. Furthermore, we remain short EURSEK with a 9.15 target," BNPP advises.
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