EUR/USD seen higher in the medium term – Danske Bank

Senior Analyst at Danske Bank Jens Perdersen expects the pair to edge higher in the next 6-12 months.

Key Quotes

“Clearly, the ECB did not want to see the violent spike in EUR/USD following Draghi’s comments on Wednesday but despite yesterday’s denouncement of the market reaction EUR/USD is again close to 2017 highs”.

“In our view, this market reaction highlights that while the ECB may attempt to plug the bottle again somewhat, it has already let the exit spirit out and any attempts to backtrack are likely to have only short-lived effects”.

“Indeed, increasingly we see a risk that the ECB has unlocked the exit discussion in the FX market, which makes for much more one-sided trading in EUR/USD as ‘gravity’ is upwards based due to the longstanding fundamental undervaluation in the cross”.

“Our call for a short-term dip in EUR/USD remains challenged and we stress again that the key move to prepare for in 6-12M is higher”.