As economists at OCBC Bank put it, “you have to see it to believe it” when it comes to eurozone macro outperformance. The EUR/USD is expected to fall in the second half of the year, as the European Central Bank (ECB) is expected to stay more dovish than the Federal Reserve.” The talk of reopening positives resulting to EZ macro outperformance has been growing, and it’s frequently framed as a positive risk for the EUR. However, in terms of good data surprises, there appears to be limited upside momentum, especially when compared to the US. As a result, remain wary of EUR bullish arguments based on EZ macro outperformance.”
“PEPP purchases may have to be scaled back in 4Q 2021, but given the ECB’s open divide between hawks and doves, this isn’t a done deal. It’s easy to forget that the PEPP is just one of many asset purchase programs available, and that others are still active.”
“At this point, the ECB’s balance sheet expansion is expected to continue to outperform the Fed’s. This contradicts our structural EUR-negative outlook for the second half of 2021.”
“The investment community is bullish on the euro, implying that the currency has a lot of room to fall if opinion shifts.”/n
