EUR/USD seen above 1.10 in the near term – Danske Bank

Pernille Henneberg, Chief Analyst at Danske Bank, expects the pair to visit the area above the 1.1000 handle in the next 3-months.

Key Quotes

“EUR/USD is edging lower still as the Fed is being repriced in a more hawkish direction and we are now back to levels following the first round of the French presidential election”.

“While the ECB remains in easing mode for now, comments from Mario Draghi yesterday hint that the evaporation of tail risks could pave the way for the ECB to grow more hawkish near term. Although it remains too early to call for an outright shift in monetary policy, we stress that risks are predominantly on the upside for the cross considering its long-standing undervaluation. Indeed, although the Fed may deliver some support to USD crosses if hiking as much as dots (i.e. FOMC rate projections) suggest, we do not think this will be the key to EUR/USD moves”.

“Notably, with political risks out of the way for the time being, we see room for ECB to send the cross above 1.10 again on a 3M horizon. However, the catalyst for a move further up would need to be a clearer picture of the ECB shifting from an easy to a tighter policy stance”.