Senior Analyst at Danske Bank Morten Helt still expects the pair to breach the 1.1300 handle in the near term.
Key Quotes
“A key event for US markets today is the midterm elections, even though we stress this should have limited FX market impact in the widely expected outcome of a divided Congress. Indeed, this is unlikely to be a game changer for USD: with President Trump set to become a lame duck, fiscal initiatives should be restricted to infrastructure (i.e. no new tax reform) and the trade dispute confined to China (i.e. not spreading to e.g. Europe)”.
“We expect a US-China trade deal further out (EUR/USD positive as the war on tariffs fades) not imminently. Some limited USD strength may be seen on the results in this base case. More broadly, we stress that real interest rates will pave the way for downside pressure in EUR/USD in 0-3M and that we look for a break of 1.13 as US cyclical and carry outperformance rule. The cross is likely to gravitate back towards 1.15 and dips towards 1.1220 should be bought into”.