Danske Research discusses EUR/USD outlook from the valuation front.
“We view fair value for EUR/USD to be a 1.08-1.20 range, depending on the model employed. Either way, at current levels, valuation is neutral if not an outright headwind for spot,” Danske notes.
“A valuation reversal (lower EUR/USD) could come from 1) rising US real rates, 2) fading EU optimism, 3) a slowdown in the (global) manufacturing sector (maybe due to bottlenecks) as well as 4) a prolonged European recovery, should the rebound prove to be weak after its initial gains have been reaped,” Danske adds.
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