Since the start of the week , the tone of ECB comments has been turning progressively more dovish , notes BNP Paribas.
"Following last week’s comments from Nowotny on the EUR’s strength , another ECB policymaker said on Monday the ECB was prepared for negative deposit rates. Although these comments are having little market impact against the backdrop of on-going US political uncertainty , we suspect they will play into a EUR sell-off once those uncertainties are resolved. Indeed , the EUR is already trading well above levels implied by relative interest rates ," BNPP adds.
"Similarly , we expect the GBP to be vulnerable to an eventual USD bounce back due to both positioning and some further softening in in data , where our UK economist expects a below-consensus print on the September retail sales later this week ," BNPP projects.
In line with this view , BNPP holds a short EUR/USD position from 1.3510 , targeting 1.28 with a stop at 1.3730. BNPP also holds a short GBP/USD position from 1.6040 , targeting 1.5330 , with a stop at 1.6310
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