EUR/USD: Break-out of multi-year 1.05-1.15 range to the topside? – Deutsche Bank

Following President Draghi’s upbeat speech in Sintra, George Saravelos, Strategist at Deutsche Bank, suggests that they are completely revising our EUR/USD outlook for the rest of the year and now see the risks as shifting towards an attempted break-out of the euro’s multi-year 1.05-1.15 range to the topside.

Key Quotes

“The speech is not the fundamental driver behind the change in view, but it aptly marks the culmination of a number of developments that have caused us to change our forecasts. We now see the risks as shifting towards an attempted break-out of the euro’s multi-year 1.05-1.15 range to the topside.”

“We now expect EUR/USD to rise to 1.16 or above by the end of the year (previous year-end forecast: 1.03). More structurally - unless an existential Eurozone crisis returns we see the conditions as having fallen into place for this year’s 1.03 low to mark the bottom in the medium-term EUR/USD bear market.”

“For now our main message is that the EUR is likely to be the key vehicle via which financial conditions in the Euro-area will be tightened. This could well mean that, like the Fed's exit, the ECB is unable to tighten as much as it thinks, but only because EUR/USD is rising in the first place.”