EUR/USD likely to move higher over the next 6-12 months

Analysts at Danske Bank expect the Federal Reserve (Fed) to utilize its room for maneuvering to ease monetary policy more than the European Central Bank (ECB) in the coming six months, given the weaker GDP growth in the US and elevated global risks weighing on the US economy.

Key Quotes:

“We continue to see a good case for the Fed to deliver another four rate cuts over the coming four meetings and eventually get ahead of the curve in terms of monetary easing. We are still of the view that the strong forward guidance and open-ended QE programme announced by the ECB in September will make a difference for the better (i.e. higher inflation expectations and weaker EUR) over the medium term. However, in the end, the Fed has more room to ease monetary policy than the ECB and we believe the Fed will use this extra room, which will push EUR/USD higher eventually.”

“If the Fed steps up easing more forcefully in the short-term, we could see a faster rebound in EUR/USD than what we project. A further easing of trade tensions and a lower risk of a hard Brexit should also support our EUR/USD projection.”

“Strong forward guidance from the ECB will give some counterweight to a continuation of the Fed rate cuts in the short-term. Eventually, the Fed will get ahead of the curve and push EUR/USD higher. We forecast EUR/USD at 1.11 in 1M and 3M, 1.13 in 3M and 1.15 in 12M.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.