EUR/USD seen within 1.16-1.19 in the near term – Danske Bank

Senior Analyst at Danske Bank Sverre Holbek believes the pair should gravitate within 1.16 and 1.19 in the 1-3 month horizon.

Key Quotes

“The dovish tapering message from the ECB yesterday cemented our sense that EUR/USD is range bound (1.19-1.16) on a 1-3M horizon with risks tilted a tad to the downside near term”.

“The longer period of QE purchases notably ensures that ECB rate hike expectations will be kept at bay, meaning that relative rates are unlikely to provide significant support to the euro in the near term”.

“As such, e.g. the 2Y swap spread is unlikely to drag EUR/USD higher on, say, a 3M horizon, rather the opposite. However, we still argue that the potential for notably debt outflows to fade should support the single currency more broadly as a continued taper cements the sense that has grabbed notably the FX market that ECB normalisation is ongoing”.