EUR/USD: Upside looks constrained by policy mix – OCBC
|OCBC strategists Sim Moh Siong and Christopher Wong holds a mildly constructive view on EUR/USD, driven mainly by expected Dollar softness rather than Euro strength. They note EUR lacks a strong undervaluation story and faces a cautious ECB, even as Germany’s fiscal stance supports growth. With the Fed sounding firmer than markets, a delayed and shallower US easing cycle may cap EUR/USD gains.
Euro gains hinge on softer Dollar
"EURUSD gains are mainly USD-driven, but upside is constrained by a lack of EUR undervaluation and a cautious ECB. With the Fed sounding firmer than markets expect, a delayed and shallower US easing cycle may cap further EURUSD strength."
"Our mildly constructive EURUSD view is driven more by USD weakness than EUR strength. As the main anti-USD, the EUR has benefited from a higher USD risk premium amid erratic US policymaking, which briefly pushed EURUSD above 1.20 in January."
"But EURUSD upside looks limited. Unlike JPY or CNY, the EUR lacks a strong undervaluation story, and recent gains have already drawn caution from dovish ECB Governing Council members. Germany’s expansionary fiscal stance should support more stable Eurozone growth into 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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