EUR/USD to rally step by step in 2018 – what are the drivers? – SocGen

EUR/USD had a good 2017 so far, rising from the depths of 1.0340 very early in the year and all the way to 1.20 before finding a range under this round number. What’s next? The team at ScoGen sees rallies ahead.

Here is their view, courtesy of eFXnews:

Societe Generale Cross Asset Strategy Research discusses EUR outlook in 2018, and thinks that the next leg of the EUR/USD recovery should be driven more by EUR rates than USD rates. 

“The ECB’s very accommodative monetary policy has fuelled a clear acceleration in eurozone growth. In 2018, anything that revives the ECB policy normalisation debate will likely support the euro. Our bearish dollar view owes less to US growth expectations than it does to expectations that the recovery in Europe/Japan is here to stay. We thus expect EUR/USD to continue to unwind its undervaluation.

…Specifically, with more uncertainty surrounding ECB normalisation than the Fed’s tightening cycle – implying more room for European yields to grind higher – the next leg of the EUR/USD recovery should be driven more by EUR rates than USD rates,” SocGen argues.

SocGen targets EUR/USD in 2018 at 1.21, 1.23, 1.25, and 1.28 by end of Q1, Q2, Q3, and Q4 respectively.

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