The US dollar strengthened after the meeting minutes revealed a more hawkish tone than expected, ignoring the fact that it is from a meeting that was held before the recent weak NFP.
What´s next for EUR/USD? The team at Bank of America Merrill Lynch weighs in:
Here is their view, courtesy of eFXnews:
Following EUR/USD’s worst quarter since inception, many are asking how low it can ultimately go, and how they can trade from from here, notes UBS.
“A seemingly endless stream of negatives– Greece, disinflation, largescale ECB asset purchases, and a lack of growth-enhancing economic reforms– has many worried about a plunge to parity and beyond,†UBS adds.
To address these questions, the following presents UBS’ views on EUR/USD in the near-term, long-term, along with its thoughts on the current bias for the risk-reward trade:
Near-term view:
“In the near term, we expect greater dispersion in dollar performance. Following three consecutive quarters of indiscriminate USD appreciation against G10 currencies, we think the importance of idiosyncratic non-US drivers for G10 FX is likely to rise. The ability of US rates to act as a catalyst for a further significant rise in the dollar is likely limited in the near term, and foreign rates have already fallen substantially,†UBS argues.
Long-term view:
“Long-term forecasts Our longer-term EUR/USD forecasts are 1.05, 1.10, and 1.15 for year-end 2015, 2016, and 2017, respectively. These are based on a combination of long-term valuation models, and our view of the cyclical path that gets us from current levels to the long term,†UBS projects.
Risk-reward view:
“We remain moderately bearish EUR/USD, though at current levels we don’t think riskreward is especially compelling in either direction…As such, we think long dollar positions should be chosen more selectively, and be concentrated against currencies from countries where idiosyncratic factors can drive FX weakness,†UBS advises.
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