EUR/USD to fall to 1.02 by year-end – Nomura

FXStreet Insights Team FXStreet

As the ECB policy decision of “on hold” in October was in line with pre-event market expectations, the decline in EUR/USD after this meeting was fairly limited. Economists at Nomura analyze the pair’s outlook.

There are several catalysts that support a lower EUR/USD

Our base case remains that the Fed will not deliver an additional rate hike in the November FOMC meeting; however, we believe its pause will be more hawkish than Thursday’s ECB announcements.

Monetary policy aside, there are several catalysts that support a lower EUR/USD: 1) the deterioration in global market risk sentiment due to higher bond yields; 2) the widening of BTP-Bund spreads, owing to Italian fiscal policy; 3) reduced uncertainty on US politics, with an increasing likelihood that a US government shutdown will be avoided; as well as 4) geopolitical tensions in the Middle East remaining a potential trigger for higher crude oil prices. The recent positive news regarding China’s growth is unlikely to sufficiently offset these factors such that market participants become bullish on EUR.

We maintain our forecast that EUR/USD will fall to 1.02 by year-end, and keep our trade recommendation of short EUR/CAD, targeting 1.3850 also by year-end.

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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