Danske Bank FX Strategy Research notes that EUR/USD has moved very far, very rapidly in a very short period on the ongoing accelerated repricing of both Europe and the US.
“The difference in the economic surprise indices between the eurozone and the US is at the highest level since spring 2015 and PMIs in the eurozone have been marching higher consistently since September 2016, while the cycle in China and the US is faltering. Eventually, there will be a spill-over from the IP cycle in China and US into the eurozone as there always is, but for now, the eurozone is shining,” Danske clarifies.
In line with this view, Danske is envisaging the beginning of the end of the USD’s multi-year bull run, and remains structurally bullish on EUR/USD.
“In the medium to long term, we remain bullish on EUR/USD as fundamentals such as valuation and current-account balances suggest a much higher EUR/USD over time,” Danske argues.