BNP Paribas: EUR/USD Can Keep Heading Higher

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00:00Is the market positioned for the US dollar to resume its status as a safe haven? How out of

00:06position could traders be? Risk of higher oil prices, exactly as Val was pointing out,

00:12means euro dollar lower. I think what's important is that European current account sensitivity to

00:19oil prices is particularly high. So this presents a downside risk to what has otherwise been a

00:24bullish euro dollar call from BNP Paribas. I think that what's notable is in spite of euro dollar

00:31falling today, it's still holding up OK above 1.15. And if we look at, for example, yesterday's

00:37price action, which also saw risk off, the dollar was actually lower. And the more days we get like

00:42that, either where the dollar isn't rallying a lot on risk off or the dollar is actually lower,

00:46the more concerned global investors will be about holding the dollar. Is there a potential for a

00:53squeeze, though, in the short term? The market feels like it's short dollars. And I'm wondering

00:58whether or not the paradigm could change and the perception could change if suddenly you see the

01:02dollar spiking sharply higher as some of those get unwound. What we see at our proprietary positioning

01:07metrics at BNP Paribas is that the market is short dollars, but it's not max short dollars. So the

01:13positioning isn't that heavy. And so, of course, there is squeeze risk, especially if the geopolitical

01:19risk off continues. But ultimately, we'd be inclined to say euro dollar over the medium term can

01:25continue to head higher. A key input into this is our view on global flows. We think that there is a

01:31structural rotation out of the dollar currently underway by global investors. And that's particularly

01:37to show the case for European investors.