Regardless of receding Greece tensions, EUR will remain under pressure this week as investor focus shifts back to the Eurozone’s still weak relative fundamentals.
The contrast between ECB easing and looming Fed tightening is perhaps now even clearer in the wake of the Fed testimony last week.
We see little scope for next this’s February CPI to stabilise given recent price developments. In turn this suggests that ECB President Draghi will maintain an aggressive monetary policy stance, keeping the door open for additional policy action even. This stands in contrast to the Fed that appears to have clarified the body of evidence required for their initial tightening.
Given the looming US payrolls release we are more comfortable, not less, with our short EUR/USD position. Weak inflation to keeps ECB aggressive.
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