Societe Generale Cross Asset Strategy Research discusses EUR/USD outlook and maintains a structural bullish bias targeting 1.30 in 6-12 months, but still warns that near-term picture still less clearer with another test to 1.15 could be on the cards coming weeks.
"With next week likely to see further upward pressure on US CPI inflation, and the FOMC set to rates another 25bp, it's hard to see why Treasury yields would fall. Even if it's too soon to look for any change in the Fed's forward-guidance, that possibility is going to hang over markets from now on and our US team like 2-10s flatteners. Rising yields, strong data and nerves about where the Fed goes from here, not to mention the chilly atmosphere at G7, will keep the overall FX market tone uncomfortable.
Inflation will go on putting pressure on the ECB to normalise policy but don't think confirmation that the RCB remains on track to stop bond-buying this year is, on its own, enough to revive the euro and turn it around. That takes better growth data and Italian political clarity, which is weeks away at the very least. You can't rule out another test of EUR/USD 1.15 in the coming weeks," SocGen argues.