EUR/USD seen at at 1.06/1.03 in 6/12M – Danske Bank

FXStreet Insights Team FXStreet

EUR/USD was more or less unaffected by the ECB decision, trading in the mid 1.0500-1.0600 range. Economists at Danske Bank analyze the pair’s outlook.

Turnaround in the exceptional run of positive US economic data surprises to weigh on the USD

We make no changes to our long-term EUR/USD forecast and therefore, we maintain our strategic case for a lower EUR/USD based on relative terms of trade, real rates and relative unit labour costs.

We forecast the cross at 1.06/1.03 in 6/12M.

In the near term, we stick to our topside risk call in EUR/USD. We expect a turnaround in the exceptional run of positive US economic data surprises to weigh on the USD. Additionally, we believe that peak policy rates, improvements in the struggling manufacturing sector, and a bottoming out of China pessimism will provide some support to EUR/USD in the near term.

The risks primarily consist of an escalation in the Middle East, leading to both a risk-off sentiment and higher energy prices, resulting in a stronger USD.

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FXStreet Insights Team

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