Danske Bank: the Fed's position opens the euro to levels above 1.20
The dollar is growing today amid declining optimism about global economic recovery, but there is still no reason for serious panic among investors: the authorities are not ready to repeat the experience of a hard lockdown and prefer moderate social distancing measures or local restrictions.
In the short term, the bulls may prefer to take a pause, taking into account the need to confirm that the situation is not getting out of control, but Danske Bank expects that the topic of recovery in the near future will remain topical, which in light of signals from the Fed about readiness to go all the way and fight against deflation gives reason to expect new highs in EURUSD this autumn. Strategists note that the pair has already risen higher than their 1-month forecast and see the risks that the rally will not stop at 1.20 and their 3-month forecast at 1.16 will require correction.
Danske Bank maintains its EURUSD forecast for 6-12 months so far, noting the problem of lower productivity in Europe as well as the prospect of reversal of the credit cycle in China, but admits that the risks to this forecast are also asymmetrical and could be increased.