Euro bulls feel fatigue as signs of slowing economic growth cloud ECB path

Bloomberg

Some euro bulls are wondering if the party is over, for now. The outlook for the past year’s best-performing major currency is being clouded by skepticism the European Central Bank will be able to tighten policy as early as previously thought, given signs of slowing economic growth. OppenheimerFunds Inc.’s multi-asset money manager Alessio de Longis is moving toward a neutral position on the euro-dollar pair, from overweight earlier this year, while Eurizon SLJ Capital Ltd.’s Neil Staines sees scope for a decline of about 6 percent in the next two months.
Danske Bank A/S has pushed back its estimate for the timing of the ECB’s first interest-rate increase since 2011 to end-2019, from June next year previously, and now suggests tactically selling the euro against the dollar.
The changes in views and positioning signal a turn in sentiment from earlier this year, when euro-bullish trades were among the top recommendations for 2018 after the currency weathered last year’s political headwinds to beat peers.
“We expect the dollar bear market to take a pause, in other words the euro bull market to take a pause” as European growth shows signs of faltering and with the US Federal Reserve likely to tightening policy further, New York-based de Longis said. “We are right now much closer to a neutral stance in the euro versus the dollar, waiting on the sidelines.”
After surging to a more than three-year high of $1.2555 in mid-February, extending last year’s 14 percent rally, the euro has retreated almost 3 percent to $1.2202. The shared currency touched a near two-month low of $1.2182 on Tuesday. It could fall as low as $1.15 in the next couple of months, according to Eurizon SLJ’s Staines. Option market sentiment is still positive on the common currency in the longer-term.