Synopsis:

Danske believes that the recent rise in EUR/USD is an overshoot, estimating a fair value closer to 1.10.

Key Points:

• Recent Highs: EUR/USD has climbed to yearly highs, approaching the 1.12 level, driven by renewed market optimism around a soft landing.
• Fundamental Overshoot: Danske argues that this rise is not fully supported by fundamentals, with a near-term fair value closer to 1.10.
• USD Outlook: Despite the current weakness in the USD, driven by positive risk appetite, Danske does not expect the sell-off to continue over the next few months.

Conclusion:

Danske suggests that the current EUR/USD levels may be an overshoot, with a fair value closer to 1.10. While the USD may remain weak in the short term, they anticipate a correction in the coming months.