EUR/USD seen at 1.06/1.03 in 6/12 Months – Danske Bank

The ECB decision has had minimal impact on EUR/USD as the currency pair remains relatively unaffected, trading within the range of mid-1.0500-1.0600. Economists from Danske Bank provide an analysis on the future prospects of this particular currency pair.

Extraordinary U-turn from Positive US Economic Data Surprise to Weigh on USD

No changes was made to the long-term EUR/USD forecast and therefore, we maintain the strategic rationale for EUR/USD lower based on relative trade, real rates, and relative unit labor costs.

This currency pair was forecasted at 1.06/1.03 in 6/12 months.

Rephrased text using Markdown language: In the coming period, our stance remains bullish on EUR/USD with an upside risk scenario. We anticipate a reversal due to an accumulation of positive surprises in the US economic data, which will exert pressure on the USD. Moreover, we believe that the peak level of policy interest rates, along with a recovery in the struggling manufacturing sector and prevailing pessimism towards China, will act as catalysts supporting the EUR/USD in the near term. However, it is important to note that certain risks persist, predominantly centered around potential escalation in the Middle East. This could trigger a risk-off sentiment and subsequently lead to higher energy prices, bolstering the strength of the USD.