EUR/USD seen at 1.22 in 12-month – Danske Bank

Arne Rasmussen, Head of FI Research at Danske Bank, expects spot to reach the 1.2200 area within a year’s view.

Key Quotes

“The EUR's effective exchange has risen 4.8% in 2017 and 11.7% since its bottom in April 2015. As such, the effective EUR is back to levels in December 2014, just before the ECB began its QE programme, but still 5.4% below the peak just before the ECB went into negative territory in June 2014”.

“Near-term EUR crosses are likely to rise further on strong momentum and EUR undervaluation versus USD where our MEVA indicates a fair value of 1.27”.

“We forecast EUR/USD at 1.22 in 12M. However, as we wrote last week, the rise in the EUR will shave at least 0.3pp off eurozone inflation in 2019. The rise in the EUR, which we expect to continue, supports our call for a very gradual exit from the ECB and a modest medium-term rise in longer term eurozone yields. Today, the pair will keep a close watch on the ADP data ahead of NFP”.