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According to analysts from Danske Bank, the outlook for relative rates is still skewed in favour of a lower EUR/USD near term but they warn that in a 12M horizon could rise to 1.25.

Key Quotes:  

“Downside risks from worries about Italian fiscal sustainability now seem much more limited near term but we still think the relative-rate support for the USD versus the EUR together with the lingering trade war will be prone to deliver pockets of USD strength during the autumn. This should leave EUR/USD in a range around 1.15 on a 3M horizon. Medium term, the euro capital outflows of recent years will fade as the first ECB hike draws closer. Alongside valuation, this is set to support EUR/USD in 6-12M.”

“We have upped our near-term profile a little as we see less potential for Italy to weigh in H2 and now see EUR/USD at 1.15 in 1M, 1.15 (previously 1.13) in 3M, 1.18 (unchanged) in 6M, and 1.25 (unchanged) in 12M.”

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