Analysts at Rabobank explained that while there is scope for the US Dollar to soften in the near-term, they expect the greenback to retain a firm bias into year end. They have revised their 3 month forecasts for EUR/USD to 1.09 from a previous forecast of 1.10.
“The EUR remains one of the worst performing G10 currencies on a one month view and in light of the economic clouds over the German economy we expect the EUR to remain under pressure vs. the USD into the end of the year as optimism about what could be a mini-trade deal wears off.”
“While Draghi will soon be handing over the reins of the ECB Presidency to Lagarde it would appear that the Governing Council has already shown its hand. Attention will now turn back to the Fed and to reactions of US policy makers. The Fed is widely expected to cut rates at the September 19 FOMC meeting and, if this coincides with optimism about US/China trade talks the Fed may have some impact in weakening the USD near-term.”
“In our view the pace of Fed rate cut is unlikely to accelerate significantly until the H2 2020. For this reason we are not expecting EUR/USD to convincingly break its downtrend until next year. We expect EUR/USD to be trading in the 1.10 area on a 6 month view, before clambering back to around 1.15 in 12 months.“