ING: euro to US dollar rate is on the way to 1.20
ING currency strategists speak with optimism about EUR/USD prospects, as they predict pair to grow to 1.18 by the end of this quarter and to 1.20 by the end of the year.
The bank notes that coronavirus data and statistics are certainly important for investors, but the real driver for the currency market is the printing press of the U.S. Federal Reserve, which it is unlikely to turn off in the foreseeable future. The abundance of dollars that the regulator has filled the financial system with since March has ensured the return of portfolio investors to emerging markets - the inflow of their funds has been observed for five consecutive weeks after almost 14 weeks of outflow, which began in late February. ING believes that the flow of money from the U.S. regulator will ensure the maintenance of an acceptable level of appetite for risk in the coming quarters. In the light of a stable negative correlation between the dollar index and the S&P 500 index, this gives reason to expect a weakening of the U.S. currency, downtrend of which will develop as economies slowly recover and adapt to new conditions.
ING notes that the most serious threat to the established currency regime in the market is the presidential election in the United States. Bank strategists believe that this factor will become a more visible driver for the dollar in late August/early September, and recall that the U.S. currency tends to show weaker dynamics in the run-up to elections.