We expect interest to continue building EUR short positions in the aftermath of the UK vote, amid anticipation that political pressure will build for reduced integration. We would caution that the eurozone’s large current account surplus should limit EUR vulnerability, particularly in the context of growing doubts on the US economic outlook.
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However, in the near-term bears are likely to have the upper hand and we see scope for EURUSD to reach 1.09.
Elections in Spain have reported a hung parliament for the second time leading to further political uncertainty as a coalition is negotiated. Today, ECB President Draghi speaks as the ECB kicks off a three-day forum on central banking which will include speeches from Fed Chair Yellen and BOE Governor Carney later in the week.