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19 Mar 2015
Sub-parity levels still on the cards for EUR/USD – Danske Bank
FXStreet (Edinburgh) - Jens Pedersen, Senior Analyst at Danske Bank, expects the pair to break below parity level in a 6-month horizon.
Key Quotes
“EUR/USD bounced on the Fed, fair and as expected; beyond the initial reaction, however, it is crucial to note that the Fed certainly does not appear as eager to take part in a global currency war as other central banks (e.g. the Riksbank)”.
“The move higher in EUR/USD also highlights another important point: the cross will remain very sensitive to corrections higher as speculative positioning, technical factors and most of our short-term models all point to a high short-term upside potential at times when the bearish sentiment temporarily fades”.
Fundamentally, however, we do still regard relative monetary policy to be a supportive factor for the USD and a significant dragging factor on the EUR in an environment with excess liquidity and negative rates (i.e. the ‘hot potato’ effect)”.
“In addition, as long as investors’ bearish EUR sentiment remains intact, high hedge ratios will lead to increased EUR selling when EUR assets perform. We consequently still target EUR/USD below parity at 0.99 in 6M”.
Key Quotes
“EUR/USD bounced on the Fed, fair and as expected; beyond the initial reaction, however, it is crucial to note that the Fed certainly does not appear as eager to take part in a global currency war as other central banks (e.g. the Riksbank)”.
“The move higher in EUR/USD also highlights another important point: the cross will remain very sensitive to corrections higher as speculative positioning, technical factors and most of our short-term models all point to a high short-term upside potential at times when the bearish sentiment temporarily fades”.
Fundamentally, however, we do still regard relative monetary policy to be a supportive factor for the USD and a significant dragging factor on the EUR in an environment with excess liquidity and negative rates (i.e. the ‘hot potato’ effect)”.
“In addition, as long as investors’ bearish EUR sentiment remains intact, high hedge ratios will lead to increased EUR selling when EUR assets perform. We consequently still target EUR/USD below parity at 0.99 in 6M”.