Deutsche Bank is not convinced that ECB action in June will be enough to cause a big sell-off in the euro.
“The June ECB meeting is gearing up to be an important event for the euro, but we struggle to see it as a game-changer First, the sensitivity of the euro to nominal interest rate differentials has dropped markedly over the last few months…Second, market expectations are already running high,” DB argues.
“However, there are signs that Euro-area portfolio inflows are maturing, while it is also very difficult seeing real yields move further in favour of the euro over the rest of the year,” DB notes.
“All this should ensure that a top is in place around this year’s highs…Our revised EUR/USD year-end forecast stands at 1.30,” DB projects.
How to play it?
“Buy EUR/USD double-no-touch. We are left with a range-trading/low vol view on the euro over the summer: buy a 4m 1.39-1.33 DNT for 13%,” DB advsies.