4 Nov 2015
EUR/USD: Headed for a bumpy downslide - Rabobank
FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, suggests that the EUR/USD is likely to trend moderately lower in the medium-term after the dovish tone of ECB President Draghi at the October Council meeting dealt a swift blow to the EUR.
Key Quotes
“The subsequent indications from ECB Council members Coeuré and Praet that they too could be happy for more policy action has increased the odds of stimulus at the December meeting.”
“That said, while this should put the EUR on the back foot, we would argue that it could be difficult for the ECB to reignite the vigorous downside momentum seen in the EUR at the start of the year due to the possibility that confidence in the carry trade will remain hindered by concerns over the growth outlook in China and other emerging markets.”
“That said, given our expectation that the Fed is likely to hike interest rates in December, the interest rate differential continues to favour the USD. We maintain that the timing and pace of Fed tightening in 2016 will guide the extent of any broad-based USD gains but that policy easing by other central banks will ensure the USD can continue to move moderately higher. We see little reason to alter our long held forecast that EUR/USD will edge to 1.08 on a 6 month view and then towards 1.05 in 12 months.”
Key Quotes
“The subsequent indications from ECB Council members Coeuré and Praet that they too could be happy for more policy action has increased the odds of stimulus at the December meeting.”
“That said, while this should put the EUR on the back foot, we would argue that it could be difficult for the ECB to reignite the vigorous downside momentum seen in the EUR at the start of the year due to the possibility that confidence in the carry trade will remain hindered by concerns over the growth outlook in China and other emerging markets.”
“That said, given our expectation that the Fed is likely to hike interest rates in December, the interest rate differential continues to favour the USD. We maintain that the timing and pace of Fed tightening in 2016 will guide the extent of any broad-based USD gains but that policy easing by other central banks will ensure the USD can continue to move moderately higher. We see little reason to alter our long held forecast that EUR/USD will edge to 1.08 on a 6 month view and then towards 1.05 in 12 months.”