ANZ FX Strategy Research notes that growing expectations that the ECB forward guidance will be upgraded amid a broadening recovery and receding deflation risks have provided support for the EUR recently.
In that regard, ANZ has become more constructive on the near-term prospects for the EUR as political risk has shifted from the euro area to the US.
However, ANZ doesn’t think that in the long-term, the conditions for a sustained bull market in EUR/USD are in place.
Over time, the US remains well advanced in the business cycle and inflation is honing in on target. We do expect some fiscal expansion and the Fed is gradually normalising policy. In addition, the ECB is not tightening and euro area inflation is still exceptionally low,“ ANZ argues.
In line with this view, ANZ targets EUR/USD at 1.15 by September before trading back around 1.10 into the first quarter of 2018.
EUR/USD is trading circa 1.1215 as of writing.
Source: ANZ, eFXnews™
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