UOB Research maintain a structural bearish bias on EUR/USD through next year.
"EUR/USD endured a summer selloff from 1.21 to a low of 1.1664 across June to August just as the FED shifted into a hawkish stance. A lift-off in rates by the ECB is not expected until 2024, at least two quarters later than the FED. Due to the longer term monetary policy divergence, we keep to our bearish view of EUR/USD and update the point forecast to 1.16 in 4Q21, 1.15 in 1Q22, 1.14 in both 2Q and 3Q22," UOB notes.
"The latest forecasts are about 100-200 pips higher compared to our last review at the start of September. This is in acknowledgement of the stabilization in yield differentials observed in the month. A risk to the view is clearer evidence of a sustained pick up in Eurozone inflation that would trigger a more decisive monetary policy calibration from the ECB," UOB adds.