According to analysts from Danske Bank, the EUR/USD pair still remains undervalued despite the recent rally. They are reviewing forecasts, taking into account upside risks.
Key Quotes:
“EUR/USD has gained significantly over the past month, as both ECB communications and the balance of political risks have shifted in favour of the euro. In our view, Mario Draghi and the ECB have already let EUR/USD out of the bottle – and basically paved the way for a continued correction in the FX market of some of the long-standing undervaluation in EUR/USD.”
“We expect these dynamics to remain key drivers for the cross in the near term, while relative rates (FOCM pricing) are likely to matter less (this was also evident last week when EUR/USD continued higher post the ECB’s press conference despite EUR interest rates trading lower).”
“Fundamentally, EUR/USD is still undervalued and we still see the case for a higher EUR/USD six to 12 months ahead. We are currently reviewing our EUR/USD forecast, stressing that we see risks skewed mainly on the upside relative to our 6M and 12M targets of 1.15 and 1.18, respectively.”
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