Credit Agricole: Sell EUR rallies into the ECB monetary policy announcement - eFXnews

FXStreet (Barcelona) - The eFXnews Team notes Credit Agricole views that the ECB will maintain its dovish policy stance, and stay committed to its QE pace, which implies that further downside for the EUR remains likely.

Key Quotes

“Even if Greece remains a market driver, next week’s main focus will be on the ECB monetary policy announcement.”

“Although growth conditions have improved of late, price developments remain muted. This is especially true as 5Y inflation swaps remain close to this year’s lows despite rising growth expectations and the weaker EUR.”

“From that angle there appears to be little likelihood of ECB President Draghi communicating a less dovish policy stance as part of next week’s press conference. On the contrary, unless inflation starts to pick up more meaningfully we expect the ECB to stay strongly committed to the current pace of QE.”

“As a result we remain in favour of selling EUR rallies, for instance against the USD. However, given elevated short positioning, upside correction risk has been rising of late, especially as there seems to be limited scope for further diverging Fed– ECB monetary policy expectations in the short term.”

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