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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