Danske Research discusses EUR/USD outlook and now targets the pair at 1.21 in 1-month, and 1.23 in 3-months.
"A credible Fed commitment to inflation is implicitly EUR positive, as the US is effectively exporting easy financial conditions to the rest of the world. Fed’s loose stance also means a potential US fiscal package can have positive spillover effects through the current-account deficit, benefitting European autos and industrials alike. Rising global inflation expectations also suppress debtdeflation and political risks, which are particularly outspoken in the euro zone. US remains a high-productivity country (USD positive) but Fed’s current policy acts as USD debasement in the near future," Danske notes.
"On a 1-3M view, focus turns to the September FOMC meeting, ECB’s view on EUR strength, global activity, equity markets and the potential for US fiscal easing. Further ahead, Europe is (still) in ample supply of internal challenges that are likely to matter on a 12M horizon - but not today," Danske adds.