Citi, Deutsche Diverge on Euro-Dollar Trades

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While Deutsche Bank backs away from its short EUR/USD trade, Citi and BNP Paribas remain bearish, pointing to political uncertainty, trade headwinds, and a stronger investment case elsewhere.

Deutsche Bank recently closed its EUR/USD short position, which was initiated at 1.1200, citing recent political developments in Germany as a key factor in its decision.

Meanwhile, Citi Research has initiated a short EUR/USD trade from 1.0467, targeting a range of 1.0175 to 1.0200, with a stop at 1.0610, based on a rangebound USD outlook.

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Citi believes the EU is likely to secure the least favourable outcome in a Ukraine ceasefire agreement, while ongoing tariff issues will continue to act as a headwind, and post-election reforms in Germany are expected to take time.

Despite these concerns, Citi remains comfortable holding its short position in a carry-positive trade as long as ranges persist.

Additionally, massive option strike expiries are currently dominating market activity.

Elsewhere, strategists at BNP Paribas maintain a bearish bias on the euro against currencies that are expected to be more resilient, such as the Australian dollar.

The bank recently recommended a short EUR/AUD position, citing improved domestic fundamentals for the Australian economy and a more supportive investment backdrop.