MUFG Bank analysts expect the EUR / USD to trade around 1.1300 by the fourth quarter of this year. They believe that the European Central Bank (ECB) should act again.
“The general level of global optimism about hopes for a smooth reversal of blockages has been reinforced in Europe by progress towards the conclusion of an agreement on a stimulus fund. One of our key premises for a possible EUR / USD upward reversal was based on the view that European officials would ultimately agree on a more meaningful support package for the key economies of the eurozone. The break above 1.1000 for EUR / USD was triggered by progress on this key issue. “
“We do not expect the decision of the German Constitutional Court questioning the legality of QE under the other PSPP QE program to hamper the actions of the ECB. On the contrary, in a demonstration of determined independence, this could encourage the ECB to act forcefully. But reduced fears about fragmentation may further see yields in Germany increase, further closing the current 10-year UST-Bund spread, which will provide additional support for the EUR.
“Our expectations for a further fall in the euro are fading. A previous range of 1.06-1.10 can now be changed to 1.08-1.12. However, we remain cautious about the extent of the increase as US-China tensions intensify and could hamper gains in EUR. “