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As tensions mount between China and the US and as fears of a second wave increase in parts of Asia and Europe, economists at Rabobank are of the view that the rush to sell USD is overdone. They expect a EUR/USD pullback to the 1.16 zone in the coming weeks.

Key quotes

“Given concerns over a second wave of coronavirus and fears about what that could do to the global economy in addition to rising China tensions, we see risk that the recent rush to unload USDs may have extended too far.” 

“The world’s need for dollars almost certainly means that there will be a scurry to secure USD funds on any further breakdown in market confidence.”

“We expect a pullback towards the EUR/USD 1.16 area in the weeks ahead.”