EUR expected to resume the upside – TDS

Strategists at TD Securities believe the European currency could resume its upside bias in the next months.

Key Quotes

“Strong growth continues in the euro area, but a sustained pickup in wages and inflation remains absent, with core at 1.1% y/y. The ECB will stress its sustained market presence as it reduces its pace of asset purchases in 2018, but interest rate rises are a question for 2019. EUR moves will be watched carefully, but so far the ECB has accepted that appreciation due to growth is not as big a risk to inflation”.

“With another round of ECB tapering imminent, we think investor focus will soon return to the EUR's upside potential. As a primary beneficiary of convergence trades, we are strategic bulls and expect the EUR to end 2017 on a firm footing. Growth remains, solid, inflation is (slowly) returning to target, and underlying BoP dynamics remain robust”.