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EUR/USD: Light at the End of the Tunnel – CIBC

Looking past the current funding crunch, the USD should go back on the defensive as markets become more in sync with Fed measures taken over the past few weeks, in the opinion of analysts at CIBC Capital Markets.

Key quotes

“Longerdated spreads to EUR rates have narrowed considerably, which suggests that EUR/USD dips will likely be bought into once the current fear around the virus dissipates.” 

“Both the EU and US are expected to fall into recession, though the effect of fiscal multiplier is likely stronger for the EUR.” 

“Longer-term, USD headwinds such as diversification will continue to work against the USD and simultaneously favour the euro.”

“Q2 2: 1.11 | Q4 20: 1.14”

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