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Mar 20 - 09:48 AM

EUR/USD: To Settle In Range Around 1.07 After Hitting 1.05; L/Term Outlook Exceptionally Blurred - Danske

By eFXdata  —  Mar 20 - 08:39 AM

Danske Research discusses EUR/USD outlook and sees the cross lingering in the 1.07 area for an extended period of time.

"We see EUR/USD heading lower still in the near term, as broad USD strength is set to continue to reign. This is especially so if the ECB efforts fail to contain European stress and/or Fed initiatives manage to fade USD funding stress. More broadly, it is no longer a question of whether or not the USD is a safe haven when things get bad enough – and we have no reasons to expect risk sentiment will improve markedly for the short term. We target the cross to hit 1.05," Danske notes. 

"Longer term, the outlook is exceptionally blurred at present but notably we do not expect the USD to significantly lose strength against the EUR. Despite extreme fiscal and monetary policy action across countries, we deem that it will be hard to find renewed confidence in the EUR given the institutional set-up in general and the German reluctance to use fiscal easing specifically.

As a result, we expect EUR/USD to linger in the 1.07 area for an extended period of time. A key upside risk to the cross would be massive fiscal expansion by the US – as it stands, a third extensive US virus package could be 2-6% of GDP – though this is facing significant obstacles in the making," Danske adds. 

Source:
Danske Research/Market Commentary

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