Synopsis:

Danske expects EUR/USD to stabilize near 1.05 in the near term as USD depreciation has narrowed rate differentials, bringing the pair closer to fundamentals. With tariff and geopolitical concerns easing, markets appear less reactive to recent macro risks.

Key Points:

1️⃣ Rate Differential Gap Narrows 📉

• USD depreciation has aligned EUR/USD closer to fundamentals.
• Short-term valuation models suggest limited immediate downside.

2️⃣ Tariff & Geopolitical Concerns Ease ⚖️

• Markets are less reactive to trade war headlines.
• This has reduced the risk premium on EUR/USD.

3️⃣ Short-Term Stability Expected 📊

• No strong catalysts for a major move in either direction.
• EUR/USD likely to consolidate around 1.05.

Conclusion:

Danske sees EUR/USD range-bound near 1.05 as macro factors and risk sentiment stabilize. While medium-term downside risks remain, immediate tariff and geopolitical risks have faded, keeping the pair anchored.