Differential in interest rates points to the EUR/USD falling back - Natixis

Jean-François Robin, Research Analyst at Natixis, suggests that the differential in interest rates points to the EUR/USD falling back and while it may not be the be-all and end-all, the differential in interest rates does have a huge bearing in the short term.

Key Quotes

“In this respect, the market is too dovish as regards the Federal Reserve’s monetary tightening and too hawkish when it comes to the ECB. We have withdrawn our parity call for EUR/USD, but we still expect the greenback to strengthen, driving down the EUR/USD to around 1.04-1.05. Sterling should continue to weaken, whereas the Chinese yuan should prove more resilient, our target for the USD/CNH now being 7.10 instead of 7.25 previously.”