EUR/USD: Euro set to strengthen over the next quarter – CIBC

Analysts at CIBC point out that an improving global sentiment and prospects of economic stabilization should see the euro strengthen. They forecast EUR/USD at 1.12 in Q1 2020 and at 1.14 in Q2. 

Key Quotes: 

“The stars are starting to align for EUR bulls. While monetary policy is still relatively very loose, manufacturing sentiment is beginning to recover – especially in Germany, following two quarters of sluggish growth. On the trade front, global sentiment is improving, and the Trump Administration has extended the final decision about auto tariffs into May 2020. Additionally, with the sweep of the UK Tories in last week’s election, the withdrawal agreement should finally pass before the January 31st deadline, setting the stage for trade talks between the UK and the EU.”

“Lagarde’s first press conference also saw a bit more optimism on the domestic picture. The new President of the ECB pointed out signs of stabilization in the Eurozone economy, and that there were initial signs of increases in underlying prices. But, that doesn’t mean that the ECB is any closer to paring back its sizeable stimulus program, not least as the Bank will only begin reviewing its strategy next month. Still, given these themes, and with the USD expected to come under pressure in the nearterm, EUR topside is looking more attractive.”