Whereas it might be too early to argue in favor of a sustained transfer decrease in the EUR/USD pair, analysts at Rabobank retain their view that fundamentals in each the US and Europe have doubtless altered sufficiently to set off a pullback to the 1.20 space.
Key Quotes:
“If the ECB continues to face extra points than the Fed is elevating inflation expectations, this might stop a big and sustained dip within the worth of EUR/USD within the months forward.”
“With out a important change in actual rates of interest in favour of the USD, it’s tough to name for a sustained reversal within the worth of the buck. This will solely come if US inflation surprises on the draw back or if US nominal charges rise noticeably. In view of the continued considerations of Fed Chair Powell concerning the labour market, his assurances that fee hikes are nonetheless a manner off and that any tapering of the QE programme can be flagged lengthy prematurely, there would appear little prospect of a change in coverage from the Fed within the coming months. That mentioned, the market has been positioned lengthy of the EUR and in need of the USD and fundamentals have altered. Given the Biden reflation commerce and the prospect of a change in path of political management in Europe this 12 months buyers could lack the desire to proceed urgent the EUR/USD trade fee greater.”
“We see scope for corrective exercise to result in a dip to EUR/USD1.20 within the present quarter earlier than pushing again to 1.22 on a 6-month view.”
