The EUR has been in demand of late, mainly on the back of the notion that there is little risk of the ECB considering unconventional policy measures such as cutting the deposit rate negative as soon as this week.
Indeed, further slowing growth momentum or rising downside risk to inflation may be needed in order to make the ECB considering such steps. This in turn suggests that the single currency is likely to remain driven by a positive capital flow situation.
Elsewhere, Fed monetary policy expectations have been capped, regardless of Friday’s better than expected US labour data. This is unlikely to change in an environment of more muted price developments.
As a result to the above outlined conditions we do not exclude additional EUR/USD upside risk in the weeks to come.