According to the Research Team at CIBC, the EUR/USD pair could recover ground if the euro goes back to trading on fundamentals.
Key Quotes:
“The euro has come under attack recently due to concerns surrounding banks’ exposure to Turkey. However, even the most exposed banks in Spain have a much lower proportion to total claims linked to Turkey than some of the headlines suggest.”
“If the euro goes back to trading on fundamentals, an improving economic backdrop relative to lower expectations than at the start of the year should see the euro claw back some ground versus the US$”.
“The EZ continues to march towards eliminating its remaining economic slack, and an upturn in interest rates could come a quarter or so earlier than the markets now expect.”
“Most of our clients won’t be bold enough to wade into the Turkish lira’s choppy waters, even if they have a view that the crisis will pass. But for more cautious investors, playing for a euro rebound is a safer way to bet against an economic Armageddon.”
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