EUR/USD should stay under pressure – Danske Bank

According to the analysts at Danske Bank, if we are close to a peak in inflation and they are right that the pricing of hikes in the Eurozone will prove premature, EUR/USD should stay under pressure in coming months and fall back towards 1.05 as close-to-neutral positioning in the cross makes room for a revival in relative rates.

Key Quotes

“Crucially, we still see the pair heading higher longer term as a period of disinflation and associated central bank responses near term should not be able to derail fundamental factors working for higher levels in the cross (our 12M forecast remains 1.14). A key risk to our G3 currency outlook in a disinflation scenario is that the yen could strengthen if risk sentiment fades and rebalancing flows add support to JPY; that said, we keep our bullish EUR/JPY recommendation.”