EUR/USD: Scope for a slide in 1-3M before rising to 1.15 - Rabobank

According to analysts from Rabobank, given that a July policy move from the FOMC is well priced in, they see the EUR/USD pair likely moving lower on a 1 to 3 month view, before moving towards the 1.15 region in the middle of next year.

Key Quotes: 

“Expectations that the Federal Reserve is on the brink of cutting interest rates combined with forecasts that the Fed funds rate could be significantly lower by the end of the last year have unsurprisingly knocked the USD in recent weeks. That said, the outlook for the greenback is complicated by a number of other factors. Firstly other major central banks are also pursuing accommodative policy settings. This should dilute the impact of lower Fed rates on the USD. Additionally, slowing world growth and geopolitical risks are likely to stymie appetite for risky emerging market assets. As long as confidence in EM is shaky, there is good reason to expect the USD to find solid support. We see scope for EUR/USD to dip lower on a 1 to 3 month view before edging up to the 1.15 area in 12 months on anticipation of the Fed’s rate cutting cycle picking up pace next year.”

“Currently appetite for risky EM assets is weighed down by slower world growth, suspicions in Washington about China’s increased economic and military might and by the worsening in the relationship between the US and Iran. Although expectations of easier policy from the Fed and other major central banks are helping to shore up risk appetite, assuming that growth and geopolitical concerns are sufficient to keep investors wary about EM, the USD is likely to find support.”