Bank of America Global Research discusses the implications of the ECB's autopilot on the EUR this year.
"The market is ignoring Lagarde's warnings that the ECB is not on autopilot. Both may be right. We argue that in the baseline and considering market-moving policy changes, the ECB is effectively on autopilot. However, expectations on policy shifts after the policy review in December can still move markets in the meantime," BofA argues.
"The above considerations suggest to us that the ECB is not the main driver of the EUR right now, if at all. We expect EURUSD to strengthen this year primarily because we expect the USD to weaken from an overvalued level. For the EUR itself to strengthen, we will need better Eurozone data.. This remains our baseline and we forecast EURUSD at 1.15 by year-end and 1.20 for next year, with the EURUSD equilibrium between 1.20 and 1.25," BofA adds.