EUR/USD seen at 1.13 in 3M - Danske Bank

Analysts at Danske Bank, lowered their forecast for EUR/USD. They see the pair now at 1.13 in three months with the possibility of a drop to 1.11.

Key Quotes: 

“The strong US economy should keep the Fed adamant about becoming ‘neutral’ on rates during the course of 2019 and thus should continue to add to the cyclical and carry support to the USD. With the risk of Italy and Brexit setbacks, this should leave EUR/USD at a range of around 1.13 on a 3M horizon with a good chance of a short-lived dip towards 1.11.”

“While the ECB is more confident on inflation, we think Draghi and co are in no hurry to push for fast ‘normalisation’ of monetary policy. However, medium term, the euro capital outflows of recent years should fade as the first ECB hike draws closer. Alongside valuation, this is set to support EUR/USD in 6-12M.”

“Positioning is now broadly neutral EUR but stretched on USD longs. We still see a case for eurozone capital outflows to fade and support the EUR as the ECB phases out negative rates.”

“We have lowered our short-term profile slightly and see EUR/USD at 1.13 in 1M, 1.13 (from 1.15) in 3M, 1.18 (unchanged) in 6M, and 1.25 (unchanged) in 12M.”