EUR/USD seen rangebound between 1.15 and 1.20 in 1-3 months – Danske Bank

Analyst at Danske Bank Mathias Mogensen expects the pair to keep the sideline theme in the near term horizon.

Key Quotes

“EUR/USD slid yesterday after the ECB minutes showed the Governing Council explicitly expressed concern over EUR overshooting. This clearly illustrates that the ECB is not entirely ready to let the euro go even if it seemed to be the message from the Sintra conference late June that USD weakness ahead would be more widely accepted now that more central banks are looking at higher inflation forecasts”.

“Coupled with minutes yesterday showing a Fed becoming less confident in the inflation outlook, this highlights that the exit talk of early summer has backtracked a bit following recent FX moves. However, in the minutes the ECB did stress that the rise in the single currency is partly due to changing fundamentals and thus indirectly accepts part of it”.

“We maintain that the cross should stay in the 1.15-1.20 range on a 1-3M horizon, after which a next leg higher and firmly above 1.20 in 2018 should materialise”.