EUR/USD expected to drop further – Rabobank

Jane Foley, Head of FX Strategy at Rabobank, gives her views on the par for the next months.

Key Quotes

“We would argue that in recent weeks the market has been attempting to reconcile influences in which a heightened debate about US inflation and fears of trade wars strongly feature. On the back of a continued tightening of Fed policy and the possibility that the pace of growth in many countries may moderate, we have been broadly positive on the USD this year versus a range of currencies. The EUR may fare better than some, but we nonetheless see further downside potential in EUR/USD in the coming months”.

“Earlier this year we revised down our 12 month forecast for EUR/USD from 1.28 to 1.21, we have now pushed our target to 1.18. This is partly in recognition of the long-term draw of interest rate differentials. Additionally, the moderation in European economic data releases in recent months, our expectation that the ECB will not hike rates before September 2019, the fact that the market had built up heavily long in EURs and the influence of technical factors are all contributing factors”.