The EUR's back to the critical 1.22 pivot point, spurring questions about what's next. A multi-dimensional approach to gauging the EUR's prospects now suggests it's likely to stall out around 1.22 again. Economists at TD Securities like another journey below 1.20, as any reflation slip-ups will favor a knee-jerk broad USD bounce.
See: EUR/USD to plummet towards 1.15 by year-end – CE
Despite the positive EZ vaccine narrative, mobility data reveals a wide reopening gap
“The primary questions are whether it will stay in the 1.20s, push to 1.25 and above, or whether it's another head fake. We're in the latter camp and think it is once again an opportune time to sell it. Our outlook for the year sees the EUR in a 1.22 to 1.18 range. Yet it makes a break above the 1.20 level and holds there next year.”
“The German election offers upside risk to these forecasts, assuming a center-left pivot that focuses on domestic spending and growth. That's where the Green Party can help to steer the political energy.”
“Given the large current account surplus and years of outward investment, we think an MMT-like narrative would help Europe more than the US. At the very least, it should lure capital back home. The EUR needs that. Otherwise, for now, we push back on the narrative that we're on the cusp of a EUR surge, reflecting the vaccine-led pickup trade.”
“On the plus side, the EUR would benefit from vaccine convergence with the US and UK if growth expectations started to narrow. The rub: we don't see this in leading high-frequency data, like mobility, and the gap on the slower moving data remains quite large.”