EUR/USD: Growing divergence – Danske Bank

Analysts at Danske Bank do not expect October’s ECB meeting to be a market mover for EUR/USD.

Key Quotes

“Significant policy changes are still too far on the horizon to grab FX market’s attention.”

“That said, we take the opportunity to reflect over the growing divergence in EUR-USD rate space and the impact on EUR/USD exchange rate. As the chart to the right shows, we are currently experiencing growing divergence.”

“The rate divergence and carry coupled with European political risks related to Brexit and Italy remains key in our call for EUR/USD to stay close to 1.15 on 3M.”

“On 6M and 12M we expect EUR/USD to go to 1.18 and 1.25 as ECB monetary policy normalisation will start to support the pair.”