EUR/USD now focused on 1.1880 – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, noted the pair’s attention now shifted to the 1.1880 region.

Key Quotes

“EUR/USD was bid again yesterday, closing in on the high end of the range (1.1479 -1.1880) we have been looking for the cross to stay within ahead of year-end. We have previously stressed that it would require a shift in rhetoric from the ECB to break the 1.1880 level (the early Oct ober high) and, while yesterday’s ECB minutes were largely balanced, they did reveal that the Governing Council is considering the option of decoupling the forward guidance on QE from the requirement of a sustained rise in inflation and instead linking it to the overall monetary policy stance”.

“This is key for the euro as it opens up the possibility for the ECB to end the QE programme in 2018 even without a clear pickup in inflation and could pave the way for the next ‘wave’ of ECB ‘normalisation’ trades. This would in turn lift the euro quite substantially in our view as it would open for support from rates and flows alike”.

“Near term, we still deem that it is too early for a sustained move higher in EUR/USD but a break of 1.1880 is clearly a risk now”.