Danske Research: EUR/USD Faces Downward Pressure Amid Inflation Expectations and Risk-Off
Danske Research notes that EUR/USD fell below the 1.09 mark as the USD's safe-haven status weighed on the cross in a risk-off week. Despite global and US inflation measures generally declining, stronger-than-expected long-term Michigan inflation expectations added upward pressure to US yields, further supporting the USD. This suggests that the Fed is unlikely to consider cutting rates in the near term.
Danske predicts that relative economic surprises from the euro area compared to the US could asymmetrically affect the EUR/USD, potentially creating more significant headwinds for the cross. Danske remains bearish on EUR/USD, expecting the cross to lower towards 1.06 in 6 months.