EUR/USD: Range-Bound Intact For Now; A Sell On Further Rallies
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Limited room of changing rate expectations should leave the single currency broadly range-bound. This is especially true as the currency maintains relatively low level of sensitivity to risk sentiment for now. Regardless of inflation expectations as measured by 5Y inflation swaps being close to historic lows, ECB President Draghi just recently reiterated that there is only limited appetite for additional policy action anytime soon.
This week’s data releases, such as PMIs and retail sales, are unlikely to suggest increased downside risks to growth. Hence, there is little scope of a change to these conditions. If anything, majors such as EUR/USD should stay driven by the USD angle. From that position this week’s data releases such as US labour data will be key.
We remain of the view that USD dips should be bought and that EUR/USD is subject to renewed downside risks this week.
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