EUR: Mixed messages from the ECB

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Despite EUR/USD being back at 1.08, the European Central Bank's trade-weighted euro has been doing reasonably well over the last month and is up around 1.5%. Looking at positioning amongst the speculative community, positioning is still net long euro – although asset managers did chop around 10% of their euro net longs in the latest reporting week. Net euro longs in this community have been pared back to levels last seen in November 2022 and are down around one-third from their peak last May. A better balanced market?

Following last week's surprise cut from the Swiss National bank, there has been increased scrutiny on ECB communication. This remains mixed, with one hawk on Friday still talking up the chances of an April rate cut. Notably, money markets still ascribe a very low probability to such an outcome and we doubt that changes much this week given the absence of key data. EUR/USD remains fragile, but at least the steadier story for the renminbi will discourage aggressive sales of EUR/USD through 1.0800.