Next week’s ECB decision, press conference and inflation projections are all key for the EUR’s outlook.
In this regard, BNP Paribas thinks that policy easing on 5 June is likely to weaken the EUR but expects the effect to be limited; a cut in interest rates will be damaging but not sufficient to weaken the EUR significantly.
“With easing widely expected, the EUR is likely to rise sharply if the ECB fails to deliver. Ultimately, however, the EUR’s turn will depend on a lot more than rate cuts and verbal dovishness: it will rest on how convincing the bank is in flagging its willingness to implement unconventional policy and particularly asset purchases,” BNP Paribas argues.
Managing EUR shorts into the meeting: “While we have trailehnd the stop on our short EURCAD recommendation, we keep our short position on the EUR against the GBP and NOK,” BNP Paribas advises.