EUR/USD moved lower around a half figure on the hawkish hold from the Fed. Economists at Danske Bank analyze the pair’s outlook.
Near-term USD tailwinds could be fading
The outcome was about as hawkish as the Fed could have engineered without actually delivering a surprise hike.
Despite the ongoing USD strength, we think there could be some potential for some EUR/USD tailwinds in the near-term.
We think that peak policy rates, improving manufacturing sector relative to the service sector and/or easing pessimism priced on China could add some support to EUR/USD within the next month. On the longer horizon, however, we maintain our strategic case for a lower EUR/USD, expecting the cross at 1.03 in 12M.
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