4 Aug 2015
EUR/USD around 1.05 in 12-month – Rabobank
FXStreet (Edinburgh) - In the opinion of Jane Foley, Senior Currency Strategist at Rabobank, spot could see its downside renewed towards 1.05 within a year’s time.
Key Quotes
“The fears about a Grexit that peaked early in July failed to spark significant downside pressure on EUR/USD”.
“Following the sharp move lower between July 2014 and March 2015, EUR/USD has spent the last few months trading within a range – albeit a choppy one”.
“While this can in part be explained by the fact that USD bulls were forced to re-adjust hopes for a June Fed rate hike, the increase in risk aversion in the global economy is also likely a factor”.
“The very low interest rates in the eurozone mean that the EUR is a likely candidate for a funding currency”.
“However, the carry trade only works properly when risk appetite is strong. The fact that the eurozone has a strong current account surplus appears to support the EUR in times of elevated uncertainty”.
“Thus, while we expect EUR/USD to trend lower in the coming months on the back of widening interest rate differentials, concerns about weak growth in China, worries about the coherence of EMU and a splattering of political uncertainty in countries such as Turkey and Poland threaten to slow the pace. We maintain a 12 month forecast for EUR/USD at 1.05”.
Key Quotes
“The fears about a Grexit that peaked early in July failed to spark significant downside pressure on EUR/USD”.
“Following the sharp move lower between July 2014 and March 2015, EUR/USD has spent the last few months trading within a range – albeit a choppy one”.
“While this can in part be explained by the fact that USD bulls were forced to re-adjust hopes for a June Fed rate hike, the increase in risk aversion in the global economy is also likely a factor”.
“The very low interest rates in the eurozone mean that the EUR is a likely candidate for a funding currency”.
“However, the carry trade only works properly when risk appetite is strong. The fact that the eurozone has a strong current account surplus appears to support the EUR in times of elevated uncertainty”.
“Thus, while we expect EUR/USD to trend lower in the coming months on the back of widening interest rate differentials, concerns about weak growth in China, worries about the coherence of EMU and a splattering of political uncertainty in countries such as Turkey and Poland threaten to slow the pace. We maintain a 12 month forecast for EUR/USD at 1.05”.