ING Research discusses EUR/USD outlook, and brings forward its 1.20 year-end target to 3Q20 and sees scope to 1.25, especially were global equity investors to execute on plans to rotate into European equities.
"Two themes have seen EUR/USD explode higher. First, the likelihood that sluggish US growth prompts ‘opportunistic reflation’ from the Fed. In practise this could see the Fed switch to average inflation targeting at the 16 Sep meeting and yield curve control. Low rates, while inflation (hopefully) rises would see US real interest rates move deeper into negative, devaluing the USD," ING notes.
"The second theme is the re-rating of the European project after progress on the EU Recovery Fund. Investors have yet to rotate into European equities, but EUR/$ could trade 1.25 if they do. We have a conviction that EUR/$ stays bid into the 3 November election," ING adds.