EUR/USD is sliding after reaching new monthly highs yesterday. What’s next? Is it poised to resume the rally after the recent correction?
Here is their view, courtesy of eFXdata:
Credit Agricole CIB Research discusses EUR/USD outlook and thinks that the lows are already in for the year with a scope for targeting 1.21 by year-end.
“…Renewed USD upside vs EUR may be less likely from here. This is even more so if we further take into account the fact that investors may have turned too dovish on the ECB. Indeed, CACIB’s ECB strategist expects the bank to bring its deposit rate back to zero by the end of 2019. As a comparison, the rates markets are pricing in c. 15bps of rate hikes over the same period. If our expectations are confirmed, this may suggest that EUR may actually gain some rate advantage vs USD next year especially if the FOMC were to hit the “pause button” after policy rates reach 3%.
In turn, renewed widening of the 2Y EUR-USD rate spread could argue for stronger, not weaker EUR/USD. We stick with our year-end forecast of 1.21 for the currency pair,” CACIB argues.
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