The continued push towards tighter global liquidity conditions (Chinese deleveraging, ECB fading PEPP and Fed tapering) is positive for the dollar. Therefore, economists at Danske Bank continue to see downside risks to EUR/USD over the coming year, targeting 1.15 in 12 months.

EUR/USD still set to move lower

“For the dollar, the key remains that tapering is being viewed as a ‘done deal’ in the sense that it will be coming by Q4. Amid this, it appears that global growth is slowing. Surveys also indicate that investor interest in Europe has been declining and sentiment is shifting towards the dollar.”

“The continued push towards tighter global liquidity conditions (Chinese deleveraging, ECB fading PEPP and Fed tapering), slower growth amid inflation uncertainty but where Fed seems reactive to the latter will likely add up to dollar strength too.” 

“We view Fed’s push to tighten in light of these trends and continue to see downside risk to EUR/USD over the coming year, targeting 1.15 in 12M, 1.13 in 15M.”

 

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