EUR/USD sidelined between 1.06/1.10 near term – Danske Bank

EUR/USD should remain in a consolidative mode between 1.06 and 1.10 in the short term.

Key Quotes

“EUR/USD jumped back above 1.09 overnight as the Trump administration’s tax plan announcement yesterday did not bring much news to the table. We expect a somewhat dovish ECB today, which if we are right, should add pressure on EUR/USD and other EUR crosses near term”.

“Moreover, we continue to stress the potential for Fed to induce a stronger USD with ‘quantitative tightening’ plans and a July hike coming up, thus keeping some EUR/USD downside potential in place”.

“Near term, the range to look for is in our view more like 1.06-1.10 with downside capped as risks from populist Europe are retreating for now”.

“Longer term, more QE from ECB should not deter the single currency from moving higher further out as FX markets should be more focused on the potential for rates to eventually be lifted out of negative territory. This could be the catalyst for the undervaluation and hence upside potential, which fundamentals continue to point to (still target 1.14 in 12M)”.