EUR/USD: Upside risk to persist, 3-month target at 1.15 – Danske Bank


The Governing Council of the European Central Bank (ECB) will meet next week. Analysts at Danske Bank expected a repetition of recent comments from various board members. They see EUR/USD rising to 1.15 in three months. 

Key Quotes: 

“At next week’s ECB policy meeting we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. We also expect they may decide not to use the EUR1,350bn PEPP envelope in full. No new initiatives are expected next week.”

“Markets may not be prepared for a ‘less dovish’ message and with abundant liquidity, PEPP and APP still ongoing, we would use the opportunity to buy into risk on trades in the EGB/Euro fixed income space.”

“Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads. For spot FX, the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg.”

“We remain constructive and expect the broad USD to decline over the coming months. In turn, our 3M forecast is 1.15.”

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