Analysts at Rabobank, continue to see scope for a correction lower in the EUR/USD pair towards EUR/USD 1.16 on a three-month perspective.
“ECB Chief Economist Lane may be worried about the impact of EUR weakness on the Eurozone inflation outlook, but the impact on the market from his concerns has been considerably dampened by the perception that unease over the current value of the currency is not shared by the majority of the ECB’s Governing Council. This perception may be altered or clarified in the days and weeks ahead. However, as its stands it would appear that Lane’s ability to turn the course of the EUR is for now limited. While in the absence of a fresh bearish trigger for the single currency EUR/USD is likely to continue finding support on dips below 1.18 in the very near term.”
“This morning Bloomberg News declared that Europe was once more the epi-centre of covid-19 as the number of new cases on the continent rose more than in the US. It is difficult to determine the extent or economic impact of any second wave of the virus. However, it is unlikely that the EU’s Recover Fund would be sufficient to cover any extensive lockdown in Europe. This scenario would likely re-open political disharmony in the region and place further pressure on ECB policymakers. While the ECB was able to pause for breath at yesterday’s policy meeting, the crisis is clearly not over. Covid-19 could yet re-open political and economic wounds and, on the expectation that safe havens may be more in demand into the end of the year, we see risk for a move towards EUR/USD 1.16 on a 3 month view.”