Danske Research discusses EUR/USD outlook and maintains its view for a potential decline through 1.10 in the near-term before bottoming out and recovering in the medium-term
"EUR/USD could probably decline further in the short term, and we see a possibility of the cross falling towards 1.10. The main reasons are the following: 1) eurozone growth is set to stay weak for most of H1 19 and the ECB is clearly keeping an eye on this risk; 2) the US economy is likely to stabilise in H1 19, providing pockets of support for the USD as the market reprices the Fed. We see EUR/USD at 1.13 on a 3M horizon," Danske notes.
"Further out, a US-China trade deal should drive a stabilisation of the Chinese economy and have a positive effect on the eurozone which – together with a USD that remains overvalued on fundamentals – helps set a floor for EUR/USD still. We see EUR/USD at 1.17 on a 12M horizon," Danske adds.