The EUR/USD continues to move sideways around the parity level ahead of next week’s FOMC meeting. According to analysts from Rabobank, the risks on the EUR/USD are tilted to the downside and they warn it could drop to 0.95.
“The precariously position of growth in the region (Eurozone) in the coming months may mean that higher short-term rates do not translate into a significantly stronger EUR. In our view, the market has not yet fully priced in the risks to the growth in the region in the coming months. Given the coincident strength of the USD, we expect that EUR/USD could be drawn further below parity in the weeks ahead.”
“It is our view that the safe haven USD is likely to remain well supported until investors are willing to move back into risky assets. This may be some months off. This period will cover what is likely to be a testing winter for the Eurozone economy. Even though further, potentially aggressive, rates hikes are widely expected from the ECB, it is our view that EUR/USD is in danger of dipping further towards 0.95.”