Chief Analyst at Danske Bank Christin Tuxen believes the pair could inch higher to the 1.25 region within a year’s view.
“The strong US economy will keep Fed in the hiking game for now and add to the carry support to USD – notwithstanding recent Trump calls for slowing the tightening pace”.
“Coupled with the risk of setbacks on Italy and Brexit negotiations, this should leave EUR/USD in a range around 1.15 on a 3M horizon. While the ECB is increasingly confident regarding the inflation outlook, we think Draghi and co are in no hurry to push for a fast ‘normalisation’ of monetary policy”.
“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”.