EUR/USD at 1.10 on a 12 mth view - Rabobank

Analysts at Rabobank explained that while it is their central view that Euro-scepticism will be kept in check next year, the clear rise of nationalism across Europe and uncertainly connected with next year’s elections suggests that volatility in the EUR is set to remain heightened.

Key Quotes:

"The experience of the GBP this year is testament to the potential impact on a currency of political uncertainty. That said, the EUR is likely to exhibit different behaviours to the pound as a consequences of positioning and the Eurozone’s healthy current account surplus.

Since the market is already short of EURs, it reaction to negative news should be lessened. The fact that the region has a very significant current account deficit (EUR25.3 bln in September) should also provide a cushion. Since it is our central scenario that EMU will continue to muddle through in the coming years and since it is our belief that the market’s US reflation expectations are overdone, we are forecasting EUR/USD at 1.10 on a 12 mth view."