EUR/USD: Not Sharing The Consensus-View On EUR Direction In 2018 – ABN AMRO

EUR/USD is drifting lower as the year draws to an end. But what’s in store for 2018? Here is the view from ABN=AMRO:

Here is their view, courtesy of eFXnews:

ABN AMRO FX Strategy Research discusses its EUR/USD outlook for 2018 and makes the case for not sharing the consensus view for further EUR upside towards fresh highs in 2018.

“We think there is upside in EUR/USD in 2019 rather than 2018. This market conviction of a higher euro is visible in the reluctance of the euro to move lower and the persistence of the excessive net-long euro positions. We think that in 2018 the conviction of the investors that believe in a higher euro and the euro’s resilience will be tested. As long as investors will remain convinced that the euro will rise in 2018, it is unlikely to happen.

“There are more reasons why we think that that 2018 is not the year for a higher EUR/USD. First, we expect the Fed to continue to tighten monetary policy in 2018 and this should support the US dollar (this could be as modest as in 2017). We expect two rate hikes of 25bp in 2018 while financial markets only price in one rate hike. Second, we think that US growth has more upside momentum in 2018 than the eurozone.

“All in all, EUR/USD will probably come under some pressure in 2018 but we expect the EUR/USD trend to remain positive,” ANB AMRO concludes.

In line with this view, ABN AMRO now targets EUR/USD through 2018 at 1.18, 1.17, 1.16, and 1.15 by end of Q1, Q2, Q3, Q4 respectively.

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