EUR/USD seen lower by year-end – Danske Bank

Senior Analyst at Danske Bank Jens Pedersen expects the single currency to lose further ground towards end of 2016, just to recover during the next year.

Key Quotes

“The political risks and relative monetary policy will weigh on EUR/USD where last week’s break of 1.0950 has opened the door for further losses towards 1.0700-1.0850”.

“The EUR received some support from the stronger than expected Eurozone manufacturing PMI release yesterday. It means that the market is unlikely to react to the German Ifo release today if it comes out similarly strongly”.

“Positioning is not yet stretched short EUR/USD, which supports a greater role for relative rates”.

“We see political risks in Europe as more EUR negative than USD negative as Clinton looks the likely winner of the US election. We expect it to be sell-the-rumour, buy-the-fact with the EUR/USD bottoming in December and heading convincingly higher in 2017 on the large Eurozone-US current account differential and valuation”.