Nordea Markets analysts explain that the EUR/USD remains rather range bound currently, stuck between a dovish Fed and a dovish ECB.
Key Quotes
“Our liquidity models though suggest a decent chance that the next move could be higher in EUR/USD, even though only to levels around 1.1650.”
“The combo of less withdrawal of USDs as Fed winds down QT and the withdrawal of EURs, as the new TLTRO-III will not attract the same interest as TLTRO-II could be enough to lift EUR/USD, even despite an uncertain global outlook (which would usually have favoured the USD). The QT program has likely been a key driver behind the strong USD in 2018. Now that the Fed has announced the end date of QT, it is easier to imagine a weaker USD.”
“It is currently tough to make a strong case for much higher EUR/USD, even despite PPP-models suggesting a fair value for EUR/USD around +1.20 in the longer run.”
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