Euro: End of Negative Rates Will Support the EUR Exchange Rates
As far as the ECB is concerned, MUFG expects that the ECB will increases interest rates at least two further times to combat inflation.
The bank considers that the underlying ECB shift away from negative interest rates and the selling of bonds will have an important impact on the currency.
According to MUFG; “The removal of negative rates we believe is somewhat under-appreciated by the markets and at these lower levels in EUR/USD we suspect strong support will emerge. It would take a notable shift in relative macro expectations for EUR/USD to break further lower towards parity.”
Although the near-term EUR/USD forecasts have been revised lower, the bank still expects medium-term gains, especially as the Euro-Zone growth outlook will improve again.
As far as the ECB is concerned, MUFG expects that the ECB will increases interest rates at least two further times to combat inflation.
The bank considers that the underlying ECB shift away from negative interest rates and the selling of bonds will have an important impact on the currency.
According to MUFG; “The removal of negative rates we believe is somewhat under-appreciated by the markets and at these lower levels in EUR/USD we suspect strong support will emerge. It would take a notable shift in relative macro expectations for EUR/USD to break further lower towards parity.”
Although the near-term EUR/USD forecasts have been revised lower, the bank still expects medium-term gains, especially as the Euro-Zone growth outlook will improve again.