EUR/USD monthly outlook: well supported by investors seeking less risk - Scotiabank

Analysts at Scotiabank explained in their monthly outlook that the Euro (EUR) remains well-supported by investors seeking less risk and higher returns outside of the US. 

Key Quotes:

"Eurozone growth momentum has improved and local equity markets have performed strongly (for unhedged USD-based investors) so far this year." 

"The current gains in spot do not appear to be fully-supported by underlying fundamentals, however, with EUR/USD currently trading around 1 standard deviation above fair value estimated by our high frequency regression model."

"The strong pace (nearly 10%) of EUR gains over the past three months is also leaving the EUR rally looking somewhat stretched and bullish sentiment perhaps near an extreme."

"European Central Bank policy makers have expressed some concern about the EUR rally and have also started to signal that they may not be ready to reduce asset purchases as soon as markets had anticipated."

"We think EUR/USD could trade a little higher still before easing back modestly in Q4 and we have adjusted our year-end forecast higher to 1.18 as a result."