According to analysts from Danske Bank the combinations of the divergence between the Federal Reserve and the European Central Bank and a fundamentally undervalued Euro, leads to consider the EUR/USD pair could rise to 1.17 in 12 months.”
Key Quotes:
“We think there are good arguments for EUR/USD to rise to 1.17 in 12 months. However, a 5% increase from the current level hinges on policy action on different levels. A combination of a US-China trade deal and/or monetary policy easing in the US and China are key prerequisites for the market to start reversing its short position in EUR/USD. Neither looks probable to us in the short term, which would create downside risks to EUR/USD if the current policy inaction leads to a further erosion in confidence.”
“Financial markets will continue to be in the hands of trade war developments and prospects of policy actions by central banks. Given the softer outlook for the global economy and more dovish central banks, we see bond yields to remain at current low levels in the remainder of 2019. A possible US-China trade deal together with Fed cuts and China easing measures could support equity markets in the fall. In the Fx markets, the divergence between the Fed and ECB together with a fundamentally undervalued euro imply EUR/USD will rise to 1.17 in 12 months in our view.”
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