EUR/USD weakness expected to stay short-lived – Danske Bank

Aila Mihr, Analyst at Danske Bank, sees potential pullbacks in spot to remain brief in the near/medium term.

Key Quotes

“EUR/USD once again spiked on Friday following the release of US GDP data, showing solid growth in Q2 but a still weak inflation outlook, as the employment cost index fell short of expectations. As such, continued solid growth in the US and still low inflation combined with an ongoing solid recovery in the euro area supports the case for less Fed-ECB divergence in the future and thus is EUR/USD positive”

“We still see EUR/USD higher longer term, targeting 1.22 in 12M and, in our view, investors and corporates should continue to focus on the long trend in EUR/USD. In the near term, we expect momentum in the appreciation trend to level off amid stretched positioning, short-term valuations and technicals”.

“We target 1.17 in 3M but we still think any corrections lower is likely to be relatively moderate and short-lived”.