EUR/USD to dive towards the 1.16 mark sooner than expected – Rabobank

EUR/USD is approaching its August low at 1.1664. As the US rates are expected to be firm and amid concerns that growth in China is slowing, adding to a set of worries for emerging markets investors, economists at Rabobank expect the pair to hit the 1.16 level sooner than anticipated.

Uncertainty connected with end of Merkel era is not positive for the EUR

“There is little expectation that the ECB will steer away from its dovish policy bias in the coming months. While Germany’s election hasn’t been a prime market moving factor, the uncertainty connected with the end of the Merkel era is not a positive factor for the EUR.”

“The USD is unlikely to retreat significantly until confidence in EM has been lifted. This likely means that stronger regional growth prospects will have to be in place. This will be more difficult to achieve in an environment in which is dominates by fears of both higher energy prices and firmer US rates.”

“EUR/USD is today approaching the August low of 1.1664, a break below is likely to shift focus to the 1.16 level.”

“Given that the prospect of a Fed funds rate at the end is live in the market and given growth concerns in emerging markets, our six-month EUR/USD target of 1.16 looks set to be hit sooner than we had been anticipating.”