EUR likely to rebound – UBS

According to analysts at the  Union Bank of Switzerland, EUR is likely to lead to more strength in the short-term as the indices that measure negative data surprises are close to all-time lows for the Eurozone, and we are likely to see a rebound in sentiment soon.

Key Quotes

“After all, compared to the Federal Reserve (Fed), the ECB has relatively few instruments at its disposal to ease monetary policy. Therefore, it would likely allow Euro/Swiss franc (EURCHF) to rise towards 1.18-1.20 before considering using exceptional measures like buying equities or re-instating quantitative easing, Flury and Trum say.”

“The US economy’s momentum has eased somewhat and the Fed has switched from autopilot of one rate hike per quarter to a data-sensitive mode. Against this backdrop, the CIO strategists expect the dollar to eventually give up some of its strength. Therefore, they lift the three-month USDCHF forecast to 1.00 (from 0.98) but keep their six- and 12-month forecasts at 1.00. “We expect USDCHF to stay in the range that it has established over the past four years.”

“When it comes to EURUSD, Flury and Trum are reiterating their three-, six- and 12-month forecasts of 1.15, 1.15 and 1.20, respectively. “Markets will monitor Europe’s economy and the political risks linked to Italy and Brexit, which are likely to hurt the euro in the short term. We see a good chance of a rebound in the EUR, however,” they conclude.”