EUR/USD has caught many by surprise - ANZ

Analysts at ANZ explained that the recent appreciation in the EUR/USD has caught many by surprise, particularly at a time of still decent USD data and expectations for ongoing Fed policy nominalisation. 

Key Quotes:

"In the past week alone, it has bounced close to 3%, which perhaps suggests some caution is necessary. But reasons for euro depreciation seem to be fading. Growth momentum is strong and political risks moderating."

"In addition, comments from ECB Governing Council member Hansson that euro appreciation will not threaten the inflation outlook reflects what seems to be emerging amongst the more hawkish members of the council – that exchange rate appreciation may help bring greater monetary balance to areas that are growing strongly."

"In the environment of USD weakness, sterling is also benefitting, hitting 1.38 vs USD. There is no evidence of independent GBP weakness, the UK economy is growing around 2.0% and it is reported that many of the regions across Europe do not want a hard Brexit. GBP is undervalued on any measure of PPP or relative to its long-run average."