Dollar recovering against the euro in early September 2020, with the EUR / USD falling from 1.20 to 1.18: but for Unicredit, the ECB’s rhetoric could limit the strength of the euro no later than December, probably not much higher than $ 1.20. For Societe Generale the EUR / USD could go below 1.17 as a consequence of a short-term correction, and then reach a high of 1.35 within three years.
The dollar continues to recover, at least in part, against the euro after the Fed announced a new, more flexible monetary policy towards inflation. Although the medium to long-term dollar forecast remains bearish, investors are repositioning themselves against the European currency. On the afternoon of Thursday 3 September the euro-dollar is trading around 1.182 / 1.184, on the afternoon of Friday 4 September around 1.179 / 1.182.
This follows comments from ECB chief economist Philip Lane, who warned about the potentially damaging effect a strong euro could have on the area’s economies. As a result, investors were under the impression that the European Central Bank would move to prevent its currency from crossing the long-term resistance of $ 1.21, if necessary.
According to Lane’s observations, the value of the EUR / USD exchange rate is very important and the strong rally of the euro seen in recent days, and the low estimates of the consumer price indices in August, have given investors the opportunity to profit. profit. But the analyst pointed out that the overall situation has not changed at all, as the euro-dollar was above 1.1740 and 1.1716 in August and July. Furthermore, the ADP employment survey, according to which an increase in private sector jobs of 428 thousand units was recorded in August, while growth of 1.17 million units was expected, does not bode well for the greenback.
Euro-Dollar forecasts: upward trend, in the medium to long term
According to Unicredit analysts, Lane’s observations aim to reduce the risk that the euro / dollar exchange rate “becomes a one-way upside bet”. The ECB’s rhetoric “could limit the gains of the euro against the dollar for the third quarter of 2020, probably not much above the 1.20 dollar mark, but it will struggle to counter the strengthening trend of the euro“. Furthermore, there are many doubts that the ECB has room to hinder the greater strength of the European common currency and reverse its trend at least as long as the fundamentals, including the yield spreads between the euro zone and the United States, remain in support of the EUR.
The Trump administration is lobbying to speed up the vaccine distribution approval process by November 1, and commented from CBA that “the rapid development and distribution of a vaccine would improve the economic outlook for the United States and globally, weakening the dollar”.
On the other hand, for Kit Juckes of Societe Generale, in the coming weeks the euro could go below 1.17 against the dollar as a result of a short-term correction, but “the EUR / USD could reach a high of 1.35 within three years. With a very tense market, with prospects for a faster economic recovery in Europe than in the United States, and with the US presidential election at the door, there could be a correction of the European currency after the recent gains”.