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The scope for higher EUR/USD remains intact over the next 4-5 months if the ‘Next Generation EU’ debt deal eventually comes into fruition, according to analysts at Nordea. 

Key quotes

“If money printing manages to re-fuel the reflationary optimism, then it doesn’t matter if more EURs are printed. The EUR/USD picks up when interest rates and inflation expectations are broadly on the rise. Relative spreads are of minor relevance.”

“More money printing is a short-term positive for the EUR as it glues together the EUR-construction (again). We see a scope for a move towards 1.17-1.20 once we get closer to the signing of the ‘Next Generation EU’ debt deal, but that is a story for H2-2020. Remember, that Germany takes over the EU presidency from July and six months forward.”

 

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