BNY’s Head of Markets Macro Strategy Bob Savage points out that the Euro has been under pressure, with EUR/USD near 1.15 as EU and Euro area economic sentiment indices fall further below 100. The report notes that EUR has been heavily sold on stagflation and energy concerns, and that rebalancing flows into EUR may be cautious given persistent macro headwinds and rising price expectations.

Soft confidence and stagflation concerns

"Even setting aside underlying asset performance, the main themes in the market are quite clear based on monthly smoothed flows since the end of February: INR and EUR have by some margin been the most-sold currencies, suffering from balance of payments and stagflation fears."

"Normal rebalancing would entail a reversal of these positions, i.e. adding to INR and EUR and fading CNY and BRL."

"However, the underlying drivers which supported these positions have not gone away, and if anything may strengthen."

"EU economic sentiment declined by 1.5 points to 96.7 in March, while euro area sentiment fell 1.6 points to 96.6, both moving further below the long-term average of 100."

"Overall uncertainty increased and price expectations rose across sectors, signaling weaker growth momentum."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)