EUR/USD: Risks are broadly skewed on the downside for USD – Danske Bank

Near term, the EUR/USD pair looks set to stay supported according to analysts at Danske Bank. They see the pair around 1.11 in 1-3 months, before edging towards 1.15 in twelve months. 

Key Quotes: 

“Risks are broadly skewed on the downside for USD, as risk sentiment stays supported by a lenient Fed amid a brightening cyclical outlook globally. Further, EUR/USD may get some support from eurozone outperformance versus the US according to our equity strategists. This is likely to make it difficult for EUR/USD to edge firmly below 1.10 for now and puts 1.12 within reach going into the new year.”

“We stress that this is not the beginning of a steady correction higher: while the cross remains undervalued, we still believe the lack of rate support for EUR caps upside in the pair, i.e. the ECB is essentially a constant for FX markets for now.”

“We look for EUR/USD to trade close to 1.11 on 1-3M and look for a rise to 1.13 on 6M on resumed Fed easing and further to 1.15 in 12M as a moderate global recovery is sustained and as the Fed supports US inflation outperformance versus the eurozone.”