EUR / USD hit 1.23 just after the Democratic victory in Georgia, but has recently declined as markets have begun to question the plan of the Federal Reserve of keeping rates low for as long as it currently indicates, analysts at Danske Banke say. They see the EUR / USD pair around 1.22 in the first quarter, before a move towards 1.16 in 12 months due to the superior performance of the US economy in the second half of the year.
Key statements:
“With the Fed leaning on the new narrative of a strong US economy and the high likelihood that we will see further easing in the US, the risks to the EUR / USD upside have faded a bit, though not entirely.”
“There is also mounting evidence that we should indeed expect to see a lower Chinese PMI and thus a decrease in tailwinds for the global manufacturing sector.”
“We changed our 1-month EUR / USD forecast from 1.24 to 1.22“.
“Our vision of a stronger dollar remains centered primarily as a story from the second half, at twelve months at 1.16.”
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