EURUSD to stay within the 1.16-1.20 range – Danske Bank

Analysts at Danske Bank explain that the EUR/USD reaction to the Catalan election has been rather muted and even if the Catalan call for independence re-intensifies in coming days, the potential for a marked drop in EUR crosses on political uncertainty is limited in their view.

Key Quotes

“Meanwhile, EURUSD CCS widened again yesterday following the relief seen earlier in the week. Year-end pricing of EUR/USD FX forwards is still driving the market and with a week to go before New Year we could be in for a ‘double dip’ in the basis. While we see downside risks to today’s US PCE release, we stress that the risk of a rewidening in basis, as well as stretched positioning in EUR/USD, makes a downside correction in the spot ahead of year-end likely. We still expect the cross to stay within the 1.16-1.20 over New Year.”

“EUR/GBP has fallen into neutral territory short term around 0.8850, after testing 0.8890 yesterday. We see risks skewed slightly on the upside going into New Year but still expect the cross to trade within the 0.8650 -0.90 range in coming months.”