Danske Research discusses EUR/USD outlook and follow up on its view that the pair medium-term outlook in 2019 resembles a ‘3-stage rocket’ targeting 1.25 at year end.
“A higher range – now around 1.15 – is justified by a move higher in real rate spreads as the Fed has withdrawn support. As Q1 progresses, we expect the second stage of the EUR/USD rebound that we forecast this year to be reached with another leg higher in the cross towards 1.20 mid-year. We have lifted our short-term profile a tad and see EUR/USD at 1.15 in 1M, 1.17 (1.13) in 3M, 1.20 (1.18) in 6M, and 1.25 (unchanged) in 12M,” Danske notes.
“In other words, while we do not yet have lift-off in the sense of new cycle-highs being within reach, the EUR/USD ‘rocket’, which valuation suggests will eventually escape gravity, is now on the launch pad – but a trade deal and/or a first ECB hike is needed for next stages of the firing to be reached,” Danske adds.