EUR/USD potential downside appears limited – Danske Bank

Jens Sorensen, Chief Analyst at Danske Bank, sees the pair’s potential downside as limited.

Key Quotes

“This week boasts a series of policy and economic events that could have a significant impact on FX markets. On Wednesday, we are likely to get another rate hike from the US Federal Reserve, which is widely expected by the market after the fairly strong employment report on Friday”.

“In our view, the most interesting part of the meeting is how hawkish the Fed comes across with respect to the future rate path”.

“Currently, the market is pricing in about five rate hikes by end- 2018, whereas the Fed and our call is for six rate hikes (three in both 2017 and 2018)”.

“Hence, if the Fed signals four rate hikes this year on Wednesday, this would be bearish for EUR/USD although the market is relatively positioned for a stronger USD, limiting some of the downside potential for the cross”.