Danske Research highlights a scope for EUR/USD to extend its recent gains towards breaking the 1.20 level.
Broad-based USD weakness has continued to dominate FX markets during the month of July (Chart 1). Earlier this month, we notably upped our 1-3M EUR/USD targets to 1.16. This target has now firmly been reached with the cross briefly rising above 1.18 and near-term direction looks intact after the Fed meeting yesterday," Danske notes.
"As we stressed on 6 July, it is such US (and hence global) inflation trends that will be key in driving EUR/USD. A Fed that looks adamant to reflate thus leaves a heightened risk of a break of 1.20 over the autumn, and we stress that there are notable upside risks to our 1-3M forecasts of 1.16,"Danske adds.