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May 11 - 02:55 PM

EUR/USD: Above 1.20 On Uncertain Theme S/T N-Term; Towards 1.15 On Peak Reflation In H2 - Danske

By eFXdata  —  May 11 - 01:30 PM

Danske Research discusses EUR/USD outlook and notes that the market is currently moving between a bottleneck-scenario (towards 1.18) and a dollar debasement case (remains above 1.20).

"In our view, the short-term theme is quite uncertain (fat tails) though likely still reflationary. We suspect that moving out of cloud-like sectors in to commodities will stay a broad dollar negative. On this, we see EUR/USD to stay above 1.20 in the short-term," Danske notes. 

"Looking further ahead, we continue to expect a scenario of 'peak reflation' in H2 as manufacturing PMIs cools as a shift from goods to services, Chinese monetary tightening and the catch-up effect of normalizing production levels joins in. Further, we expect Fed to turn hawkish. Thus, rising real dollar rates are in our view a key theme for H2. Over H2, our main scenario remains 'peak reflation' and we see spot towards 1.15," Danske adds. 

Source:
Danske Research/Market Commentary

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