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Bearish EUR case building up again - BNP Paribas

FXStreet (Bali) - According to BNP Paribas, EUR-bearish drivers are starting to build up once again, with the bank recommending short EURUSD and EURGBP targeting 1.0900 and 0.7000 respectively.

Key Quotes

Eurozone data calendar is quiet as we approach the ECB policy announcement on Thursday. Although markets generally anticipate a dovish statement, if not an immediate policy move, they remain hesitant to rebuild short positioning going into the meeting, given that short-EUR strategies have not delivered over the past two quarters.

However, we think that EUR-bearish drivers are starting to build up once again. Eurozone portfolio outflows slowed somewhat in July-August but should re-accelerate amid stronger risk sentiment and with ECB bond buying continuing to supress real yields.

Meanwhile our rates strategists believe eurozone front-end yields are not pricing in enough risk of further policy accommodation and have recommended receiving 2y swap with a target of -7bp.

We remain short EURUSD and EURGBP in our spot FX recommendations portfolio targeting a decline to 1.0900 and 0.7000 respectively. BoE Governor Carney is making a speech today at 17:00 GMT on the impact of EU membership on the UK economy and banking sectors.

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