Ned Rumpeltin, European head of FX strategy at TD Securities, thinks that a significant shift is underway in G10 FX markets as after several months of grinding higher against other major currencies, they think the USD is shifting to a weaker footing.

Key Quotes

“The EUR may not be a leader in this process, but its size and importance mean it will be an essential component of a weaker USD trend. Our initial focus has been on recent shifts in monetary policy expectations. This is not the whole story, however. We see other forces at work that should help push EURUSD higher in the months ahead.”

“Specifically, the euro area’s underlying capital flows situation continues to improve. Importantly, net portfolio flows are becoming less of a drag on the currency as the ECB has halted its asset purchases. Global investors remain net sellers of the region’s debt markets but this has eased significantly since the start of the year.”

“Sluggish growth, fragile sentiment, and tepid inflation pressures all remain significant near-term headwinds for the EUR. Once these subside, however, we think the tide is starting to come in for the common currency.”