USD: Rest of the World keeps USD supported. Bullish.
Watch: JOLTs, Retail Sales.
USD will likely continue to see strength as data outperforms, and central banks elsewhere ease further. At the moment, we believe USD can strengthen even without the support of yields, as the US remains a relative growth outperformer, illustrated by the recent upward revision in GDP. We will watch to see if lower oil prices have supported retail sales.
EUR: Disappointment and Delay. Bearish.
Watch: IP.
The market had positioned for a more dovish stance at the latest ECB meeting, and the central bank failed to meet stretched expectations. As a result, we believe EURUSD could head higher in the near term. That said, we maintain our bearish medium term view. The central bank kept a dovish tone, aggressively lowering its inflation forecasts, with scope for even further downward revisions if oil prices remain soft, and explicitly mentioned it is considering further unconventional measures.
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