Investors should proceed cautiously when buying euros against the greenback, given that U.S. Fed is on track to tighten while a “chronic” lack of inflation persists in Europe, Jefferies strategist Brad Bechtel wrote in a research note.
Though the ECB is likely “feeling good” about improved financial conditions, the global outlook and domestic politics, President Mario Draghi won’t want to tighten if inflation is “nowhere to be seen”
Meanwhile, the Fed is on track to raise rates for a third time this year and initiate balance-sheet reduction. Fed will have no reason not to continue as planned, should oil rebound or inflation moderate.
EUR/JPY is the best place to position for euro strength
Source: Bloomberg Pro Terminal
Trader I. Ivanov
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