13 Jan 2015
EUR/USD targets 1.10 by year-end - RBS
FXStreet (Bali) - Paul Robson, FX Strategist at RBS, expects the EUR/USD exchange rate to trade at 110 by year-end.
Key Quotes
"The Fed is reading from the standard central bank playbook when it says it plans to look through the first round impact of lower energy prices and is watching developments in core inflation. Dollar gains and the fact that the US is a major importer of consumer goods suggest core inflation stays low."
"The FOMC may also choose to look through the impact of the exchange rate. While the impact on inflation can be temporary, they may worry that inflation expectations are at risk of becoming de-anchored."
"Evidence of stronger global disinflation pressure (China PPI and weak price growth in Europe) also means that the Fed may be less certain that inflation is set to rise over the policy horizon. Hence markets can push back the expected start date of policy normalisation. But a 5% saar US growth rate means any such move is likely to be relatively tame."
"Core inflation is key. It’s currently 1.7% in the US, 0.8% in the Euro area and 1.2% in the UK. This squares nicely with our expected running order of central bank policy normalisation and how we hence see the major currencies performing over the coming year - EUR/USD to 1.10, GBP/USD into the 1.40s and EUR/GBP to grind lower."
Key Quotes
"The Fed is reading from the standard central bank playbook when it says it plans to look through the first round impact of lower energy prices and is watching developments in core inflation. Dollar gains and the fact that the US is a major importer of consumer goods suggest core inflation stays low."
"The FOMC may also choose to look through the impact of the exchange rate. While the impact on inflation can be temporary, they may worry that inflation expectations are at risk of becoming de-anchored."
"Evidence of stronger global disinflation pressure (China PPI and weak price growth in Europe) also means that the Fed may be less certain that inflation is set to rise over the policy horizon. Hence markets can push back the expected start date of policy normalisation. But a 5% saar US growth rate means any such move is likely to be relatively tame."
"Core inflation is key. It’s currently 1.7% in the US, 0.8% in the Euro area and 1.2% in the UK. This squares nicely with our expected running order of central bank policy normalisation and how we hence see the major currencies performing over the coming year - EUR/USD to 1.10, GBP/USD into the 1.40s and EUR/GBP to grind lower."