17 October, AtoZForex.com, London – ECB press conference, BoC meeting and many more. The following are G10 highlights and projections from Credit Agricole for the week ahead.
EUR and USD
Following the latest unwind of USD-longs, the EUR TWI has approached the August highs. All eyes will now be on the ECB to see if monetary measures will be taken against the excessive FX appreciation.
“We think it is too early for new policy measures,” Yet, this has already been priced by the markets. Therefore, given the still favorable EU BoP flow environment and the overhang of long USD positions, “we think that short EURGBP is a more attractive trade ahead of the ECB and UK retail sales next week,” the major bank advises.
The GBP is backed by a backdrop of further improving economic growth conditions where the softer inflation data should be regarded as driven by external factors like commodity price developments. “This is especially true when considering that medium-term inflation expectations as measured by 5Y forward breakeven rates have been well supported at around 3%,” the bank adds.
Return of risk aversion
Another theme for the next week could be the return of risk aversion to the Forex market. The ECB press conference on Thursday and Chinese Q3 GDP numbers could stir trouble into the market’s sentiment. “This could support EUR and JPY but weigh on AUD, NZD and CAD,” CA adds.
October BoC meeting on Wednesday will also be under the spotlight. Although CACIB analysts expect the central bank to remain on hold for now, downgrade in the economic outlook and hints of further easing could be on the cards before the year end. “That should revive the headwinds for CAD especially against USD,” Credit Agricole points out.
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