EUR/USD: Year-end target of 1.14 unchanged – NBF
|Stéfane Marion and Krishen Rangasamy, analysts at National Bank of Canada, see that Eurozone’s weak economic growth and monetary policy loosening do not bode well for the euro, but it still can rise temporally, especially if the USD loses steam.
Key Quotes:
“While the trade-weighted USD has room to appreciate further over the medium term, it could find itself under pressure over the near term if the White House engages in verbal or actual currency intervention or if, as we expect, U.S. data shows a deceleration in economic activity.”
“The euro took a beating in July, hammered by weak economic data and a dovish European Central Bank. The eurozone’s GDP grew just 0.8% annualized in Q2 or just 1.1% year-on-year, contrasting sharply with the U.S.’s 2.3% year-on-year growth print.”
“The trade war is wreaking havoc by reducing trade volumes and hence restraining GDP growth in the zone’s export-centric economies such as Germany. The latter’s manufacturing PMI, which sank to an 84-month low of 43.1 in July, demonstrates the extent of the damage in the eurozone’s largest economy.”
“Weak economic growth and monetary policy loosening do not bode well for the euro. That’s not to say, however, the common currency can’t perk up temporarily especially if, as we expect, the USD loses steam over the near term. We have left unchanged our end-of-year target of 1.14 for EURUSD.”
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