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Chief Analyst at Danske Bank Christin Tuxen expects the pair to climb to the 1.25 area within a year’s view.

Key Quotes

“Downside risks from worries over Italian fiscal sustainability now seem much more limited near term (see next page) but we still think the relative-rate support to the USD versus the EUR, together with the lingering trade war, will be prone to deliver pockets of USD strength in the autumn. This should leave EUR/USD in a range around 1.15 on a 3M horizon but the relative cyclical picture may be shifting in favour of the euro area towards year-end and hold a hand under the pair, possibly supported by relative equity flows. However, 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 lifted 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”.