Via Rabobank, analysis on EUR/USD
- surprising weakness in the October reading of the ZEW sentiment index
- sharp drop back in the ZEW index from September's levels also hints at the potential that the sharp improvement in EUR sentiment in the spring could be souring
(ps, more on ZEW here: It looks like the hopeful euphoria seen in August and September is beginning to fade )
- undermined the single currency and highlighted the confluence of market concerns regarding rising covid-19 cases in Europe in addition to Brexit and election uncertainty in the US
- the sharp move higher in EUR/USD in the spring and early summer was driven by both a deterioration in the fundamentals behind the USD and an improvement in the drivers behind the EUR
- Since then, however, the EUR’s backdrop has taken a turn for the worse at a time when the market is still holding long positions
- see scope for a dip to EUR/USD 1.16 on a 3-month view
