EUR: Risks of a drift above 1.20 levels

In view of analysts at Deutsche Bank, despite the large move this year in Euro, they see risks of a drift above their 1.20 target vs. the dollar next year.

Key Quotes

“EURUSD already above our year-end target of 1.17 and could squeeze higher

German political uncertainty could be positive if Grand Coalition emerges
Growth momentum exceptionally strong”

“14% move this year largest since 2014, but not extreme and less pronounced on a trade-weighted basis (+9%).”

“We target 1.20 for end-2018 but EURUSD is more likely to overshoot than to reverse lower

Currency only just approaching fair value
Global real money still structurally underweight, generating demand for euro assets
Few signs of stronger euro weighing on growth
First ECB rate hike priced very dovishly for 2020, and a repricing of the front-end would be more bullish than QE taper.”

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