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EUR/USD poised for further downside – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren noted there is still scope for further downside in the pair.

Key Quotes

EUR/USD decline extended yesterday after the EU voiced the negative opinion on the Italian budget and euro PMIs disappointed, adding to the sense of a fragile macro environment in the euro zone amid mounting political risks”.

“The ECB meeting today is set to deliver little new policy signals and as such should not be expected to move the single currency much”.

“With USD strength still looming around every corner due to its carry lure (despite the minimal support to the greenback from the equity sell-off), EUR/USD could be in for a test of the autumn lows (1.1301, 15-Aug low) near term as the ECB is not ready to provide support for the euro just yet”.

“On this regard, we not that the Effective Fed Funds rate continues to inch higher and yesterday reached 2.20, which means it now equals the Interest On Excess Reserves. A small sign that USD is scarce in some corners of the market due to Federal Reserve QT”.

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