EUR/USD: Slow Eurozone economic growth and further ECB easing has the potential to weigh further on the Euro – Wells Fargo

Analysts at Wells Fargo, see the Euro moving to the upside against the US Dollar over the long term but they warn that view is increasingly becoming predicated on a further slowdown in the US economy rather than a pickup in the Eurozone economy.

Key Quotes: 

“We do expect the anticipation and implementation of ECB December monetary policy easing will lead to a reduction in key Eurozone market interest rates and bond yields either heading lower into and/or shortly after that December meeting.”

“The combination of slow Eurozone economic growth and further ECB easing clearly has the potential to weigh further on the euro.”

“The risks for the euro remain tilted to the downside, and a further fall in the EUR/USD exchange rate remains a distinct possibility in the near term.” 

“The euro has been trending lower versus the U.S. dollar since early 2018, and the combination of slow Eurozone economic growth and further ECB easing clearly has the potential to weigh further on the euro. Over the longer term, we still see euro upside, although that view increasingly becoming predicated on a further slowdown in the U.S. economy rather than a pickup in the Eurozone economy. If relative U.S.-Eurozone growth does not, in fact, converge further, and especially if the Eurozone economy slips and enters outright recession, that would jeopardize our view for longer-term euro gains.”