EUR/USD: no reaction expected from ECB, higher long-term - Danske Bank

Analysts from Danske Bank do not expect a significant reaction in EUR/USD on the ECB meeting. They see the pair higher in the long-term, targeting 1.18 in 3 months, 1.22 in 6 and 1.25 in 12. 

Key Quotes: 

“We do not expect any significant reaction in EUR/USD on the ECB’s QE recalibration announcement, as we already have seen substantial repricing of the ECB in the FX market over the summer.”

“We still see EUR/USD around current levels on a 1-3M horizon with the risks skewed slightly to the downside, as we expect the Fed to hike interest rates in December and as speculative accounts look stretched on EUR/USD longs according to IMM data. However, we maintain that any dips in EUR/USD should be shallow and short-lived. We target1.17 in 1M and 1.18in 3M.”

“Longer term, we continue to stress that a 2018 rebound towards 1.25 is on the cards as upside risks still dominate the longer-term outlook. While a first 10bp hike from the ECB is only priced in in mid-2019, which we deem as fair, we stress that what is key for the FX market is the direction in which the ECB is now headed.”

“We target 1.22 in 6M and 1.25 in 12M.”