Christin Tuxen, Chief Analyst at Danske Bank, believes the pair could slip back to the 1.1200 level within a month’s view.
Key Quotes
“Short term, we think the relative-rate support for USD and EUR political risks will dominate, leaving EUR/USD in the sub-1.15 range but we see the cross staying above 1.10. The break of 1.15 on Turkey in our view accelerated the recent fall and the Turkish risk premium should eventually fade and alleviate some of the down pressure from USD carry near term”.
“The relative cyclical picture may shift in favour of the euro area towards year-end. However, medium term, we expect the euro capital outflows of recent years to fade as the first ECB hike draws closer. Alongside valuation, this is set to support EUR/USD in 6-12M”.
“We lower our near-term profile due to the significance of the break of 1.15 and now see EUR/USD at 1.12 in 1M, 1.13 (1.17) in 3M, 1.18 (previously 1.20) in 6M and 1.25 (unchanged) in 12M”.
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