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EUR: Risks of a drift above 1.20 levels – Deutsche Bank

In view of analysts at Deutsche Bank, despite the large move this year in Euro, they see risks of a drift above their 1.20 target vs. the dollar next year.

Key Quotes

“EURUSD already above our year-end target of 1.17 and could squeeze higher

  • German political uncertainty could be positive if Grand Coalition emerges
  • Growth momentum exceptionally strong”

“14% move this year largest since 2014, but not extreme and less pronounced on a trade-weighted basis (+9%).”

“We target 1.20 for end-2018 but EURUSD is more likely to overshoot than to reverse lower

  • Currency only just approaching fair value
  • Global real money still structurally underweight, generating demand for euro assets
  • Few signs of stronger euro weighing on growth
  • First ECB rate hike priced very dovishly for 2020, and a repricing of the front-end would be more bullish than QE taper.”

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