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EUR/USD: Strong improvement over the medium term - Lloyds Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 11, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - Analysts from Lloyds Bank expect EUR/USD to remain in a range with a downward bias in the short-term and a stronger euro over the medium term.

    Key Quotes:

    “The market was caught the wrong side of EUR/USD last month, with disappointment over the scale of the ECB’s stimulus announcement trumping the widely anticipated 25bp rise in US interest rates. As a result, the euro staged a strong pre-Christmas rally, from a low close to 1.05 to above 1.10.”

    “Although plunging oil prices have contributed to an improving euro area economy, the associated weakness of inflation has fanned speculation of further ECB stimulus.”

    “Near term, we expect the euro to remain caught in a range with a downward bias. The possibility of a US rate rise in March and the weakness of euro area inflation are likely to be key drivers.”

    “Over the medium term, however, we expect EUR/USD to stage a strong improvement, supported by a continued narrowing in the gap between US and euro area growth. That said, the euro is unlikely to make any sustained progress until inflation turns higher and/or an end to further policy stimulus is in sight. We target 1.05 by end Q1 and 1.10 by end 2016.”
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