Economists at Nordea argue that rates are still too low relative to the economic outlook, in particular in USD, but the European Central Bank clearly disagrees. Regarding the EUR/USD pair, a move to the 1.15-1.17 range is likely.
“USD interest rates will increase more (2% 10yr bond yield target for this summer), the ECB will face an uphill battle in terms of containing the spill-over to EUR rates, but will try their best, while EUR/USD is a clear sell-on-rallies towards levels around 1.15-1.17.”
“Should the Fed allow USD reflation to run even hotter, the USD is a buy. Should the Fed cause a tantrum, the USD is a buy and should risk assets drop due to higher real rates, the USD is a buy.”
“A big operation twist or outright curve control in the US is likely needed to reverse our view on EUR/USD.”