The current environment with economic growth slowing down is favorable to the US dollar according to analysts from Danske Bank. They forecast the EUR/USD pair at 1.04 in a one-month perspective, at 1.03 in three months and at 1.00 in a year.
Key Quotes:
“Fundamentally, the US should continue to be a high(er) interest rate market and equities continue to appeal to foreign investors. This means the US is likely to attract capital, which helps the USD.”
“The large negative terms-of-trade shock to Europe vs US, a further cyclical weakening among trading partners, the coordinated tightening of global financial conditions, broadening USD strength and downside risk to the euro area make us keep our focus on EUR/USD moving still lower (targeting 1.00) – a view not shared by consensus.”
“The key risk to shift EUR/USD towards 1.15 is seeing global inflation pressures fade and industrial production increase. The upside risk also include a renewed focus on easing Chinese credit policy and a global capex uptick but neither appear to be materialising, at present.”