MUFG Bank Analysts they maintain their neutral outlook for the euro in the next month, but are widening the range to reflect construction risks. They expect the EUR / USD to trade between 1.1400 and 1.2200.
Key statements:
“The euro has continued to lose bullish momentum against the US dollar over the past month, with the pair falling towards the low of our previous range between 1.1600 and 1.2100. It has resulted in leveraged funds reducing long euro positions at the fastest pace in eight months. Bullish sentiment towards the euro has been affected by the renewed spread of COVID-19 in Europe. ”
“We expect the ECB to provide more stimulus perhaps as soon as its next economic policy meeting on October 29, although it is more likely on December 12. However, the ECB will at least be relieved that the rate of appreciation of the euro has recently slowed down. ”
“We expect the US dollar to be undermined by the outcome of the US presidential elections. The worst short-term outcome for the US dollar would be for Joe Biden to become president and the Democrats would also take control of the Senate. ”
“We expect the improvement in risk sentiment to help weaken the US dollar, even if higher long-term US yields provide some support to the US dollar. As the most liquid alternative to the US dollar, the euro would benefit by default. ”
“We also expect the EU and the UK to reach a Brexit trade deal in the next month … While a deal would primarily encourage a stronger pound, it could also have a more modest positive impact on the euro.”
Credits: Forex Street
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