The EUR/USD pair appears to have stabilized around parity. The Crédit Agricole economists expect to see a short-term EUR/USD consolidation.
Any surprise to the upside of the CPI in the euro zone will support a more aggressive interest rate hike by the ECB
“The recent widening of the short-term EUR/USD spread may persist and continue to boost our short-term fair value for EUR/USD. The resulting undervaluation of spot FX appears to be already rivaling that seen in mid-July.” And if this latest episode is any use, it could usher in a period of EUR/USD consolidation.”
“The prospect of an earlier ECB tightening cycle could trigger the liquidation of some euro-funded carry trades and thus force investors to unwind some of their euro shorts.”
“The release of the eurozone CPI estimate for August is vitally important for euro investorsand any upside surprises in the data will likely add to calls for a more aggressive rate hike from the ECB.”
Source: Fx Street
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