Jane Foley, Senior FX Strategist at Rabobank, suggests that they expect the recent upside potential to be tough above the EUR/USD 1.20 level in 2018

Key Quotes 

“ECB President Draghi promoted a cautious outlook on inflation at his December press conference and signalled that the Eurozone economy is not yet strong enough to warrant a reduction of policy stimulus.  That said, there was no strong expectations in the market that the ECB would be hiking rates in 2018.  The big questions in the market surrounding the ECB relate to whether QE will be drawn to a close after 2018’s nine month tapered extension and in which quarter the following year the central bank is likely to hike.”

“Although the dovish tone of ECB President Draghi on inflation weighed on the EUR, given the substantial upward revision to Eurozone growth estimates and the increased growth risks that are now seen by the ECB, the EUR has likely been provided with adequate sustenance to hold off another bout of USD strength.  That said, the market is already long of the single currency.  As a consequence, we expect upside potential to be tough above the EUR/USD 1.20 level in 2018.”


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