EUR/USD could gather traction in the medium term – Danske Bank

Senior Analyst at Danske Bank Kristoffer Lomholt gave his opinion on the prospects of the USD following yesterday’s FOMC minutes.

Key Quotes

“USD crosses bid after the FOMC minutes revealed that the Fed is likely to be closer to start phasing out its reinvestment policy, i.e. to start ‘quantitative tightening’, than most market participants envisaged”.

“We still look for this process to be initiated in Q1 next year and stress that while the Fed will be keen to mitigate any unwanted rise in interest rates, this could tighten the USD liquidity situation and put upward pressure on EUR/USD forwards via the cross-currency basis (even for unchanged policy rates)”.