The case for a USD/EURO short seems to be strengthening. It seems as if long-run expectations of the USD/EURO pair has favored the euro with its rebound in economic growth and subtle increases in inflation.
However, the market may be dismissing the US economies strength as the Fed has more or less confirmed 3 rate hikes in 2018 as well as leaning towards a 4th one if inflation and economic conditions continue to expand & grow.
Here is our thesis for a EURO short - via a Bear Put spread on the FXE etf
-This week’s ECB meeting seems unlikley to result in increased rates tapering while the Fed is actively unwinding QE
-Softer EU inflation data, manufacturing PMI’s, and the Italian election results will keep pressure low on Draghi to tighten despite solid GDP statistics
-Recent US equity spike in volatility likely to be top of ECB voters’ minds.
-Target $112 by end of Q2 2018 but $108 if major European stress event occurs
However, the market may be dismissing the US economies strength as the Fed has more or less confirmed 3 rate hikes in 2018 as well as leaning towards a 4th one if inflation and economic conditions continue to expand & grow.
Here is our thesis for a EURO short - via a Bear Put spread on the FXE etf
-This week’s ECB meeting seems unlikley to result in increased rates tapering while the Fed is actively unwinding QE
-Softer EU inflation data, manufacturing PMI’s, and the Italian election results will keep pressure low on Draghi to tighten despite solid GDP statistics
-Recent US equity spike in volatility likely to be top of ECB voters’ minds.
-Target $112 by end of Q2 2018 but $108 if major European stress event occurs