Westpac advise to sell the euro at the moment

Westpac currency strategists still believe that any attempt of the euro to rise above 1.0600 area provides a good opportunity to sell. The euro has risen in January from around 1.04 to the top near 1.0830, it is supported by a narrowing of spreads in bond yields, strong data in the Eurozone and negative news from the US as well as the weakening of expectations of increasing inflation due the new policy of Trump, analysts say.

Since then, spreads on two-year bonds in the eurozone and the US have recovered almost all the losses in January, promising new lows for the euro, they added. However, EUR/USD pair fell by only 50% of the rally from the lows in January.

The chances of an increase in interest rates by the Federal Reserve rose to 45 percent in March, but they must remain at least at current levels, then need to be increased during the presentation of Trump before both houses of Congress, analysts say.

At the same time on the side of the euro are financial flows in defensive assets that can further reduce yields on German bonds, at least until the upcoming elections in the Netherlands (March 15), then in France (second round on 07 May). Bank analysts expect a continuation of the downward movement.