Search ForexCrunch

Analysts at CIBC expect the EUR/USD pair to trade at 1.16 by the end of the second quarter and at 1.18 by the end of the third. They consider the euro will struggle against a stronger dollar in the near-term.  

Key Quotes:  

“The first quarter witnessed the single currency depreciate by around 4% versus the USD. Real money and speculative investors pared EUR holdings amidst concerns over eurozone recovery hopes being compromised by a third Covid wave. Moreover, EU vaccination rollout has been bedevilled by political mismanagement, while vaccine hesitancy proved to be amplified by unhelpful political comments.”

“While the ECB will maintain an easy monetary stance, the fiscal backdrop relative to the US remains somewhat constrained. While the agreement on the EU rescue fund was a truly ground breaking decision, the failure to push forward and actually disburse the funds remains an ongoing concern.”

“Sliding macro sentiment has seen leveraged shorts extend to levels last seen before the EU rescue fund decision. Despite the early year growth headwinds prompting a lower EUR trading trajectory than previously assumed, we do not expect the EUR to unwind H2 2020 gains. A somewhat belated ramping up in vaccinations will help to limit macro negativity ahead.”

“An uptick in vaccinations in the weeks ahead will add to already elevated forward looking eurozone sentiment indicators. While the EUR will struggle against a still resurgent greenback in the near term we would expect a mild rebound into H2 as growth dynamics become more supportive.”