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USD outlook sours however the EUR carries dangers – Rabobank

“Whereas slowing US development, a plateauing of Fed rates of interest and doubtlessly elevated deal with the widening US funds deficit all argue for a deterioration within the outlook for the USD subsequent yr, there are additionally draw back dangers for the EUR,” argue Rabobank analysts.

Key quotes

“Whereas there’s a menace to the EUR from politics subsequent yr, the Eurozone development outlook can also be a disappointment. Closing German Q3 GDP knowledge has confirmed the economic system contracted by – zero.2% q/q. There may be hope for a bounce again within the closing months of the yr led by the auto sector. Nonetheless, German November manufacturing PMI knowledge have disenchanted.”

“As well as, a slowdown in world commerce development and the fall-out from Brexit might current draw back dangers to development in This autumn and into 2019. On the idea that US development can be slowing in 2019, the market is prone to query whether or not the ECB can comply with by way of on its steering of upper charges in H2 2019. A extra dovish ECB would additionally weigh on the outlook for the EUR.”

“It’s presently our view that the souring of US fundamentals will enable EUR/USD to show modestly larger into the center of subsequent yr. Nonetheless, headwinds for the EUR might generate draw back dangers. In the meantime in an atmosphere of slowing world development and political dangers within the Eurozone we see scope for the secure havens JPY and CHF to carry out nicely. We’re forecasting USD/JPY at 110 on a 9 to 12 month view. We see EUR/CHF at 1.10 in 9 to 12 months and USD/CHF at zero.96.”

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