It has fallen under the radar. But another story in the making this year is euro outperformance against all G10 FX despite dollar strength. We think this has more to go, with the majority of EUR-crosses continuing to trend higher. We see three drivers:
First, most of the valuation correction in EUR has taken place. EUR/USD was one of the first crosses to turn in 2008. It is other G10 and EM FX that now need to take the brunt of adjustment versus the USD. Put differently, the last five years have been dominated by Fed QE and the Eurozone crisis. As global markets transition away from these two negative headwinds, both the USD and EUR should naturally be the biggest beneficiaries.
Read the full report: FX Daily
Deutsche Bank