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10 Apr 2015
EUR/USD at 1.08 in 12-month – Danske Bank
FXStreet (Edinburgh) - Sverre Holbek, Senior Analyst at Danske Bank, believes the pair could face renewed downside pressure in the upcoming periods and heads towards 1.08 in 12-m view.
Key Quotes
“We stress that the ECB is set to deliver little to steer the EUR near term, and thus that focus in the FX market will now gradually turn to the ECB's response to the pick-up in headline inflation that we project for this autumn”.
“If we are correct that the ECB will await a pick-up in core inflation and wages before airing any exit plans, the potential for the ECB to fuel a EUR rebound, everything else equal, will be somewhat limited”.
“Together with a Fed on track to deliver a first hike this year, this supports our case for further downside in EUR/USD on a 6M horizon”.
“That said, a drop to around parity should be about as far as the cross will drop this year: the contribution of the Fed's tightening to dollar strength has historically proved short-lived, and a turn in eurozone inflation will likely fuel some speculation within FX markets that the ECB may not be quite as patient as the Fed when it comes to normalising policy again”.
“This could fuel some limited EUR/USD upside heading into 2016. We still target 1.08 in 12M”.
Key Quotes
“We stress that the ECB is set to deliver little to steer the EUR near term, and thus that focus in the FX market will now gradually turn to the ECB's response to the pick-up in headline inflation that we project for this autumn”.
“If we are correct that the ECB will await a pick-up in core inflation and wages before airing any exit plans, the potential for the ECB to fuel a EUR rebound, everything else equal, will be somewhat limited”.
“Together with a Fed on track to deliver a first hike this year, this supports our case for further downside in EUR/USD on a 6M horizon”.
“That said, a drop to around parity should be about as far as the cross will drop this year: the contribution of the Fed's tightening to dollar strength has historically proved short-lived, and a turn in eurozone inflation will likely fuel some speculation within FX markets that the ECB may not be quite as patient as the Fed when it comes to normalising policy again”.
“This could fuel some limited EUR/USD upside heading into 2016. We still target 1.08 in 12M”.