The single currency has been volatile of late mainly on the back of continuing uncertainty related to Greece. Although sentiment improved anew after Greece reassured investors that its banks will not face any liquidity issues after the ECB announced that it will no longer accept Greek debt as collateral, it appears unlikely that uncertainty will decrease considerably. This is especially true as Greece’s leftist government is unlikely to find a satisfying compromise with EU officials in the very short term, in particular as PM Tsipras still intends to roll back austerity meassures.
In any case, we remain of the view that the EUR should be sold on rallies as strongly capped ECB monetary policy expectations should ultimately prove the currency’s most sustainable market driver.
It must be noted too, that most of the past two weeks’ upside appears to be position-squaring-related. This in itself should classify the latest movement as corrective rather than a change in trend.
In terms of data, this week’s main focus will be Q4 GDP, which is unlikely to surprise considerably higher.
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