EUR/USD: Looking for a lower euro in H2-Danske Bank
According to analysts from Danske Bank continue to forecast EUR/USD at 1.22 in one to three months and look for a decline to 1.16 in a twelve-month horizon.
Key Quotes:
“We view fair value for EUR/USD to be a 1.08-1.20 range, depending on the model employed. Either way, at current levels, valuation is neutral if not an outright headwind for spot. US assets’ trend performance continues to be strong relative to European counterparts and the COVID-19 pandemic has fast-forwarded the adoption of technology, favouring flows into the US. EUR/USD thus faces structural decline due to a lack of competitiveness. A valuation reversal (lower EUR/USD) could come from rising US real rates, fading EU optimism, or Chinese slowdown.”
“Upside risks which can take EUR/USD above 1.24 include the EU proving to be an engine of world growth and/or the Fed strongly backtracking on the recent optimism for H2, fuelling further broad USD decline. Details on more fiscal easing will matter as we move in to Q1 vis-àvis its impact on pricing of US policy rates and relative economic recovery.”
“A strong US economy and the high likelihood of more US easing, have eased EUR/USD upside risks somewhat – although not entirely. We should indeed expect to see lower Chinese PMIs and thus fading tailwinds for global manufacturing. We keep our 1M and 3M EUR/USD at 1.22 as these events are as expected. Furthermore, we still look for a lower EUR/USD in H2 with a 12M forecast of 1.16.”
source:fxstreet.com