EUR/USD has declined below the 1.3400 support level once again this morning, notes BNP Paribas.
On the data front, the composite PMI printed weaker than expected at 53.8, driven partly by a decline of Italy’s PMI readings. Meanwhile, euro area-wide June retail sales showed a 0.4% rise, slightly below expectations of 0.5%,
“A better tone in EM markets is likely to be also contributing to EURUSD’s decline as the EUR becomes an increasingly favoured funding currency,” BNP argues.
“This week’s key EUR event will be the ECB policy announcement on Thursday, where we expect policymakers to keep the possibility of asset purchases on the table, which should help maintain the EUR’s status as the risk funding currency,” BNP projects.
In line with this view, BNP maintains a short EUR/USD and a short EUR/GBP positions in its portfolio.