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EUR/USD points to further downside – Westpac

FXStreet (Edinburgh) - In the view of Richard Franulovich, Strategist at Westpac, the pair could see its decline renewed in the next periods.

Key Quotes

“Short term bund-Tsy spreads continue to crater against EUR, the 2yr spread hitting fresh nine-year lows almost daily amid the yawning Fed-ECB policy paths, a compelling negative EUR signal”.

“Fade any EUR position squaring driven strength into year’s end - bund yields fell sharply after the ECB launched sovereign QE in Jan and may well do so again, while a decent Nov payrolls will see markets start to price in a March follow-up Fed hike”.

EUR/USD has been trading slavishly in line with the 2yr Bund-Tsy spread”.

“Those looking for a “dovish Fed hike” and year-end position squaring pressures to produce a bounce in EUR/USD later in December might be disappointed. If anything EUR may well surprise on the downside”.

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