Why We Still See EUR/USD Reaching 1.20 Before It Reaches 1.00

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We keep our EUR/USD forecasts unchanged and still expect EUR/USD to continue to trade in the ‘post-Brexit’ range of 1.10- 1.14 in coming months. We target EUR/USD at 1.12 in 1-3M.

While we believe that there will be some slowdown in the Eurozone in coming months, we still do not expect the ECB to cut rates. Political uncertainty is likely to increase as the US presidential elections are moving closer.

However, political uncertainty could weigh on both the EUR and the USD and thus uncertainty is more likely to be source of increased volatility rather than a directional risk. Longer term, we maintain our long-held view that the undervaluation of the EUR and the wide eurozone-US current account differential are longer-term EUR positives.

Hence, EUR/USD will reach 1.20 before it reaches 1.00, in our view. We target 1.14 in 6M and 1.18 in 12M.


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