EUR/USD ended Draghi’s press conference on a mixed tone, but the rising inflation levels imply some easing on the easing. What’s the trade? Here are two opinions:
Here is their view, courtesy of eFXnews:
EUR: ECB To Remove ‘Or Lower’ In June Statement; EUR/USD Enroute To 1.13 – NAB
NAB FX Strategy Research expects the ECB at its June meeting to remove the words ‘or lower’ from the pledge to ‘keep rates unchanged or lower for an extended period of time …’
In addition, NAB expects the ECB to flag a reduction in asset purchases in October or more likely in December event ahead of a gradual taper through 2018 and from March next year a lift in the -0.4%
Against this backdrop, NAB now expects EUR/USD to trade at 1.10 in June 2017, rising to 1.11 September and 1.13 by end December.
In 2018, NAB sees EUR/USD rising to 1.15 by end-March, 1.16 June through to 1.19 by end December 2018.
EUR/USD is trading circa 1.0920 as of writing.
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EUR: Prepare For QE Tapering; What’s The Trade? – BofAML
Bank of America Merrill Lynch FX Strategy Research has updated its EUR outlook and forecasts upward this week and maintained its EUR strategy intact (see here).
In particular, BofAML now expects markets to start focusing on the ECB’s plans to taper QE after the current program expires in December.
“We expect this debate to start in June and lead to a decision in September, with QE tapering to begin in January. Although we do not expect depo rate hikes at the same time, QE tapering should support the EUR,” BofAML argues.
Strategy: Buy any dips in EUR/JPY.
“Given our bullish USD view, expecting more Fed hikes than the market in 2017-18 and tax reform this year, we prefer to express our bullish EUR views against the JPY. Assuming the BoJ sticks to its yield targeting regime until inflation is above 2%, which is what Kuroda has committed to do, we would buy any dips in EUR/JPY,” BofAML argues.
Forecasts: BofAML now expects EUR/USD to end 2017 at 1.08 and EUR/JPY at 126.
EUR/USD is trading circa 1.0907 and EUR/JPY is trading circa 122.34 as of writing.