EUR: 5 Reasons For EUR's Decline; 4 Of Them Interlinked & Would Recede If COVID-19 Outlook Improves

Citi discusses the key reasons behind EUR's recent decline.

"Reasons for EUR’s decline – (1) EU less US (hard) data momentum is turning negative; (2) Downward revisions to Chinese and global growth in the face of the COVID-19 outbreak to impact the euro zone more given supply chain linkages between Europe and China – a supply chain recovery remains problematic in the near term even if Coronavirus sentiment makes an immediate turn; (3) Foreign (Japanese and European) investor buying of US bonds FX unhedged; (4) A poor technical picture; (5) Rising political risks in Germany and Italy ," Citi notes.

"Bottom Line - Drivers 1, 2, 3 & 4 are interlinked and would likely recede if the Coronavirus outlook improves," Citi adds.