EUR/USD: US cyclical growth narrative becomes an increasingly key driver – Danske Bank

EUR/USD remains in the low-1.08-1.09 range in a relatively quiet start to the week, Danske Bank's FX analysts Kristoffer Kjær Lomholt and Filip Andersson report. 

Further upside risk in EUR/USD

"Despite declining US yields amid US growth concerns, the broad USD remained well-supported during the US session on risk-off sentiment. In Germany, reports suggest the Greens may withhold support for the debt package in parliament, despite its alignment with their election platform. We still expect them to back it eventually." 

"While much of the EUR-optimism appears priced in, confirmation of the debt package or a potential ceasefire deal in Ukraine could provide another boost. Today, focus will be on January JOLTS job openings, offering insight into the US labour market. In RtM USD this week, we analyse the potential implications of a 'Mar-a-Lago Accord." 

"While such an event could carry significant consequences for the USD, we see it as unlikely. We maintain a tactical bias toward further upside risk in EUR/USD, with the US cyclical growth narrative becoming an increasingly key driver."