ANZ Research discusses EUR/USD outlook and sees a gradual uptrend towards 1.23, 1.24, and 1.26 by end of Q2, Q3, and Q4 respectively.
"The gradual uptrend in EUR/USD is intact, supported by the cyclical re-rating of the euro area economy as the vaccine rollout continues. This improved prognosis is making it difficult for the European Central Bank (ECB) to argue that rising sovereign yields are unwarranted. The pick-up in euro area (EA) inflation has also pushed down real interest rates, boosting the favourability of financing conditions," ANZ notes.
"Whilst the ECB may keep the current level of bond purchases when it next meets on 10 June, attention will increasingly focus on the ECB’s future policy tool kit and mix. It is plausible that Pandemic Emergency Purchase Programme could end next March (as guided) making it inevitable that the debate over tapering will gather pace in H2. This can translate out the yield curve, pushing yields up and supporting the euro," ANZ adds.