Deutsche Bank's 3 "pillars' of their bullish EUR view are (in brief):
- EUR growth is turning back up, ECB terminal rate pricing continues to move higher and European equity markets are near record highs.
- US rates repricing has been very sharp, preventing a narrowing of the US-EU interest rate differential as we expected.
- China reopening trades have severely underperformed.
DB say only the first is doing well, and ask:
- The question that needs to be answered now is whether EUR/USD is more likely to go back towards 1.10 in coming months or move closer to parity?
DB still see their EUR positive view as valid:
- US – Europe rate differential ...since the start of the year European inflation has surprised more to the upside compared to the US
- the underlying euro flow picture is structurally much more positive this year and supportive of resilience
- our view on China remains more optimistic than the consensus view ... our Asia colleagues expect more easing to be announced during the NPC meetings ... and forecast a big rebound in the property sector
- the broad dollar continues to price a sizeable risk premium over and above that justified by macro and financial inputs, suggesting that all that is needed is for the market to price a peak in Fed Funds for the dollar to start grinding lower again
