EUR/USD Rate Forecast Of $0.95 In 2017 Not Aggressive: Deutsche Bank
EUR/USD: 'Increasingly Confident' In Parity & Beyond: 3 Reasons
We are feeling increasingly confident that EUR/USD will break out of its 1.05- 1.15 range and trade through parity next year.
First, it is high time EURUSD started to move again. The duration of the current lack of trend is approaching a record high.
Second, the dollar is approaching its sweet spot for a late-cycle rally. Big dollar moves are less dependent on the change in short-end yields but on the absolute level: whenever the dollar becomes a top-3 G10 high-yielder it rallies as yield-seeking inflows return. A Fed rate hike this December will make the dollar the third highest yielding currency in the world, a strong dollar positive.
EUR/USD today’s Exchange Rate is 1.0596.
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Deutsche Bank has maintained its EUR/USD exchange rate forecast of $0.9500 by the end of 2017, adding that this is not seen as a too aggressive prediction given the current market developments.
While the previous Deutsche Bank forecasts of $1.05 and $0.95 for the EUR/USD exchange rate for the end 2016 and 2017, respectively, were widely viewed as ‘aggressive’, the forecast now appears not aggressive enough according to the latest release.
"While we are not changing these EUR/USD forecasts, the risks to these projections are skewed toward a EUR downside overshoot,“ Alan Ruskin, a strategist at Deutsche Bank Securities, wrote in a research note on Thursday.
The combination of the recent US and European political developments combined with the US policy cycle is creating a market environment of what the Deutsche Bank analyst called a ‘perfect storm’ with persistently elevated FX volatility.
"We are keeping our long standing call for EUR/USD to slide below parity and leave our 2017 year-end forecast at $0.95,“ Ruskin wrote in a research note on Thursday.
“We also await details on the Trump stimulus, and the extent to which the growth impulse falls in 2018 and beyond, before we make any changes to our main 2018 and 2019 forecasts. For now our forecasts are based on the USD upswing being fairly close in length to the early 1980s and late 1990s, though the risks are that this cycle gets extended beyond past cycles,” Ruskin further noted.
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