EUR/USD seen rangebound in the medium term – Danske Bank

The pair is viewed within the 1.15-1.21 range for the next 6 months, according to Morten Helt, Senior Analyst at Danske Bank.

Key Quotes

“EUR/USD ended the ECB day down close to two big figures as the new time-dependent rate guidance effectively keeps rate-hike expectations and thus eurozone capital inflows at bay”.

“Together with the rising carry appeal of USD, this underlines that relative rates should be a drag on EUR/USD for some time still and avert a move back to the mid-1.20s in the near future”.

“It is likely we will need to get much closer to the first ECB hike before seeing a sustained move above the 1.20 mark (our 12M target remains 1.25). We are thus now back in the lower end of the 1.15-1.21 range, which we see prevailing over the next 6M, and thus clients with USD income/assets should consider using the latest spot drop to lock in 6-12M exposure in our view”.

“Notably, the ECB’s Sintra conference next week could shift focus to the underlying wage price pressure, which the ECB sees mounting and help limit further EUR downside from here”.