According to National Bank of Canada analyst, at some point investors will come to expect the end of Fed tightening and/or the start of policy normalization by the European Central Bank, giving potential to EUR/USD to bounce back in 2019.
Key Quotes:
“Another currency we believe could do well against the USD in 2019 is the euro. True, things do not look good at this point for the common currency which continues to struggle amidst ongoing internal strife (e.g. Brexit, Italian politics) and soft economic growth. The latter is keeping both inflation and inflation expectations lower than what the European Central Bank would have liked.”
“Investors may come to anticipate at some point the end of Fed tightening and/or the start of ECB policy normalization. As such the common currency has potential to bounce back in 2019.”
“Any euro upswing could be assisted by the reversal of speculative net short positions which are currently the highest since the first quarter of 2017. We are leaving unchanged our end-of2019 forecast of 1.23 for EURUSD.”
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