The EUR was one of the strongest G10 performers on Monday as markets were paying increased attention to geopolitics, notes BNP Paribas.
Playing into EUR’s resilience, according to BNP, was also a Bloomberg report suggesting that ECB is likely to refrain from additional stimulus in the coming months as it conducts its assessment of eurozone banks.
“However, the story also suggested ECB could react if inflation surprises to the downside. The EUR’s increased attractiveness as a funding currency leaves plenty of room for it to weaken amid intensifying monetary policy divergences between the eurozone on one hand and the US/UK on the other,” BNP argues.
“For EURUSD the post-ECB low of 1.3503 remains key and we continue targeting 1.32 on our short trade recommendation,” BNP advises.