Eurozone current account strength to support EUR especially on the crosses
The improving trend to the eurozone external balance of payments continued this morning as eurozone current account data again showed a strong y/y increase to rise to EUR 26.1 billion. This level represents the second largest monthly figure on record. Furthermore, net portfolio inflows continue to rise, driven by the second straight monthly increase in net equity flows. This latter trend is dominated by eurozone investors repatriating foreign holdings but is at least consistent with an increased propensity to hold eurozone assets. The data produces a positive flow effect on the currency – one that we believe is best reflected through EUR crosses especially EURCHF, EURJPY and EURGBP. We are reluctant to chase EURUSD higher given expectations for higher US yields and a stronger USD.
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BNP Paribas