The strengthening of the Euro has been predicted by some forex analysts and financial markets. In some recent forex news, the Euro is often mentioned as the strengthening strengthening US Dollar ends. Could it be?
The Storm That Swept Euro Must Be Over
Currently, the single currency currency is still buffeted by the decline in connection with political uncertainty in Italy. The problem is, there is speculation that the Italian populist parties, the 5-Star Movements and League, are planning a proposal to make the Italian government's debt from the European Central Bank (ECB) of 250 billion euros abolished.
Nevertheless, the seeds of optimism on the progress of the Euro Zone momentum are not completely gone. There is still hope that the ECB monetary tightening can be implemented this year. This will have an impact on the strengthening of the Euro.
"The current condition is like a storm that hit EUR / USD," said Valentin Marinov, head of Group-of-10 Currency Strategy at Credit Agricole SA. Marinov himself holds a fairly constructive view in the medium to long term. According to him, EUR / USD will reach $ 1.26 level later this year, as consensus forecast from Bloomberg survey.
How Big Banks Predict Euro Forward
The major banks of the world have their respective predictions against the strengthening of the Euro. Here is a list of predictions from a number of major financial institutions on the performance of the Euro in the future:
ING Groep NV
"The weakening Euro scenario will be heavily influenced by short-term 'double blows' of weak economic data and increased political uncertainty," said Viraj Patel analyst.
However, with the now more clear EUR / USD position compared to the position at the beginning of April, then we need to wait for the emergence of a pure negative factor for the Euro that has an impact on weakening, for example a structural economic slowdown in Eurozone countries or the start of Italy categorized as a risk to the future of Europe.
However, that does not mean the weak momentum for the Euro and immediately faded. Neither the general analysis of ING nor Patel himself, does not say that they suspect the downward momentum will disappear once the concerns subside.
The Dutch bank estimates a superficial correction due to a 'double blow' on EUR / USD, which is only in the range of $ 1.17- $ 1.18 only and can reach $ 1.30 at the end of the year.
Credit Agricole (CA)
The Euro decline was driven by the yield differential between Euro Zone bonds and US bonds, thus:
If the widening of the yield difference can not be ruled out and it is evident that the concerns of Italian politics and the euro zone's economic conditions can delay the normalization of the ECB's policy, the EUR / USD will be weighed down.
EUR / USD is still close to lows or could even break the lower lows in the short term.
However, Credit Agricole, represented by Valentin Marinov, predicts the EUR / USD rate will reach $ 1.30 by the end of 2018. The economic divergence between the US and the Euro Zone will be temporary.
MUFG
The increased political risk of Italy will spur more selling against the Euro, although it is doubtful whether the action will continue in the short term.
"Further downside could be a bigger problem for the Euro, but we will be even more surprised if that happens in the near future," said Lee Hardman who represents the Japanese bank.
Within the next few months, the Euro will curl at the bottom and will rise to $ 1.26 at the end of 2018.
MUFG analysts strongly believe in this prediction, although the risk of decline will be enlarged to see current developments.
In general, almost all parties still expect the decline in the Euro in some time to come. However, an upward reversal will take shape in late 2018 or early 2019.