In the view of the analysts at ANZ, the common currency is still exposed to downside risks, as they believe the Euro area political uncertainties may not be over yet.
Key Quotes:
“Our near-term forecasts for EUR/USD anticipate consolidation in a 1.14-1.20 range. A decisive break below the 1.1350 area is needed to open up EUR downside and a retest of 1.05. Political and trade uncertainty would have to deteriorate significantly.
It is premature to declare that euro area uncertainties are over. Questions remain around how the new Italian government will agree to prioritize its spending objectives, how Rome will interact with Europe and how the US-EU trade dispute will evolve.
·The ECB is closely monitoring developments. We expect it will taper quantitative easing (QE) later this year. The risk is that extended uncertainty could undermine confidence in the inflation outlook, implying interest rates will remain at current levels for longer.”
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