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17 Feb 2014
Flash: EUR/USD – how high? – Rabobank
FXStreet (Córdoba) - Jane Foley, analyst at Rabobank expects the EUR/USD to gradually move towards 1.2800 but noted that any sign that a pause in Fed tapering could be announced would limit the ability of the USD to win back ground from the EUR.
Key Quotes
"Whether or not the USD will rally as the spring gets underway is very dependent on whether the US economy can maintain enough momentum for the market to assume that the Fed will continue to taper its monthly asset purchases during the course of the year. Any sign that a pause in tapering could be announced would limit the ability of the USD to win back ground from the EUR".
"Overall, the US economy has performed far better than the Eurozone. The US has now notched up eleven consecutive quarters of growth while the Eurozone proved to be much slower in shrugging off the mantles of recession. That said, irrespective of past performance, the current soggy performance of the USD is a measure of how current economic conditions are unfolding relative to what is priced in. While US data have disappointed, last week's release of Q4 Eurozone GDP data at 0.3% q/q brought a modest positive surprise".
"We have argued for some time that the resilience of the EUR is a function of several factors. The prospects of EZ economic recovery is one, but the strength of the region's current account surplus and the enhanced belief that there is a robust future for ECB are also contributing factors".
"In the nineteen months since Draghi's 'whatever it takes speech' in July 2012, EUR/USD has appreciated by approximately 13%, to trade near 1.3700. That said, our central forecast is that the USD will gradually win back ground medium-term. Our 12 mth forecast stands at EUR/USD 1.28".
"This view, however, assumes that US growth accelerates in the coming months. A continuation of disappointing US data, combined with a fall in perceived deflationary risks in the Eurozone would pose significantly risks to this view and would enhance risks of EUR/USD holding a 1.3700-1.4000 trading range in the coming weeks".
Key Quotes
"Whether or not the USD will rally as the spring gets underway is very dependent on whether the US economy can maintain enough momentum for the market to assume that the Fed will continue to taper its monthly asset purchases during the course of the year. Any sign that a pause in tapering could be announced would limit the ability of the USD to win back ground from the EUR".
"Overall, the US economy has performed far better than the Eurozone. The US has now notched up eleven consecutive quarters of growth while the Eurozone proved to be much slower in shrugging off the mantles of recession. That said, irrespective of past performance, the current soggy performance of the USD is a measure of how current economic conditions are unfolding relative to what is priced in. While US data have disappointed, last week's release of Q4 Eurozone GDP data at 0.3% q/q brought a modest positive surprise".
"We have argued for some time that the resilience of the EUR is a function of several factors. The prospects of EZ economic recovery is one, but the strength of the region's current account surplus and the enhanced belief that there is a robust future for ECB are also contributing factors".
"In the nineteen months since Draghi's 'whatever it takes speech' in July 2012, EUR/USD has appreciated by approximately 13%, to trade near 1.3700. That said, our central forecast is that the USD will gradually win back ground medium-term. Our 12 mth forecast stands at EUR/USD 1.28".
"This view, however, assumes that US growth accelerates in the coming months. A continuation of disappointing US data, combined with a fall in perceived deflationary risks in the Eurozone would pose significantly risks to this view and would enhance risks of EUR/USD holding a 1.3700-1.4000 trading range in the coming weeks".