EUR/USD is grinding its way lower. Did it pick a new direction or is the move only temporary? And how will it react to trade wars?
Here is their view, courtesy of eFXnews:
Danske Research discusses EUR/USD outlook in relation to the recent trade wars developments between the US and China.
Two scenarios for the US-China trade conflict. We are now entering a crucial phase in the trade conflict with heightened uncertainty as to what will happen next.
“1- Our base case of negotiations and a ‘grand bargain’ could notably weigh on EUR/USD.
2- However, in our risk scenario of an outright trade war, where the US isolates itself, we stress that this will: (i) in the short term return focus to US protectionist measures being associated with a political push for a weaker USD from the Trump administration and send the USD lower still and (ii) in the medium term weigh on the USD via productivity differentials with our ‘trade-war-adjusted’ medium-term valuation (MEVA) estimate for EUR/USD being around 1.34,” Danske argues.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.