Danske Research maintains a strategic bearish bias on EUR/USD through year-end.
"We have long argued the strategic case for a lower EUR/USD based on relative terms of trade, real rates (growth prospects) and relative unit labour costs. Meanwhile, we increasingly think there is a potential for the cross to also head lower on a short-term horizon driven by the market realisation that financial conditions need to tighten, relative rates as well as relative asset demand. As a difference to the period from September to early January, Eurozone equities are now underperforming peers, which could be an indication that EUR/USD has peaked," Danske notes.
"On Friday, we lowered our downward sloping EUR/USD forecast profile slightly but maintained a bottom above parity, as we believe new energy/real rate shocks are required for a return to the September lows. We now forecast EUR/USD at 1.06 in 1M, 1.04 in 3M and 1.02 in both 6M and 12M," Danske adds.