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According to a weekend note from analysts at ANZ, the EUR/USD major pair could make a move towards 1.25 in the coming months as fundamentals throughout the Eurozone stabilize.

Key quotes

“Trump-Junker trade talks were successful in defusing immediate trade tensions but progress on trade talks is essential in coming months.

The ECB made no changes to its forward guidance or medium term growth and inflation outlook. However, Draghi did seem more confident in the ECB’s growth assessment and the prospect for a sustainable convergence in inflation to target.

We believe a more positive backdrop for the euro is emerging, having been rocked by trade anxiety and elevated growth concerns in Q2. Stabilising growth and reduced trade anxiety should allow for a gradual EUR recovery in coming months.

Fundamentally, a weaker EUR is not needed, whilst sustained EUR depreciation could unsettle renewed trade dialogue between Brussels and Washington. Higher US policy rates are not a reason to sell the EUR.

We advise buying the EUR vs USD at current levels and averaging into any near term weakness. We look for a medium term move towards 1.25 and above.”