In opinion of Aila Mihr, Analyst at Danske Bank, the pair is expected to remain under pressure in the next weeks.
“EUR/USD CCS widened significantly yesterday as the cost of hedging USD over the turn of the year spiked. There was no apparent trigger behind the move, e.g. USD liquidity is relatively easy compared to last year ahead of the expiry of the debt ceiling suspension on Friday”.
“In our view, the driving force is more likely year-end balance sheet constraints, i.e. the leverage ratio, liquidity coverage ratio and payments to the resolution fund in Europe”.
“The wider EUR/USD CCS has together with growing US tax-reform optimism also weighed on the EUR/USD spot with the cross breaking below 1.18”.
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