EUR/USD further downside expected – Danske Bank

Thomas Harr, Global Head of FICC Research at Danske Bank, noted the pair remains poised for further pullbacks in the near term.

Key Quotes

“Over the coming one-three months, we maintain our call that EUR/USD should move lower, supported by relative rates and our expectation that the Trump administration is likely to announce details in coming months about corporate tax reforms, border tax adjustments and HIA2”.

“Moreover, we see European politics as modestly EUR negative in comings months and short positioning in EUR/USD is no longer in stretched territory, which should increase the sensitivity to relative rates”.

“We stress that risks are skewed to the downside in the short term, conditional on Trump and the Fed”.

“Longer term, we maintain our long-held view that the undervaluation of the EUR and the wide eurozone-US current account differential are EUR positives. In addition, the Fed may become worried about the strength of the trade-weighted USD, which would mitigate rate. Overall, we maintain our forecasts unchanged”.