Danske EURUSD targets: ECB Dec deposit cut


23 October, AtoZForex.com, Amsterdam  Building further on the post-ECB analysis of the Deutsch Bank, the Danske Bank has also provided its outlook on the ECB and EURUSD. Confirming the overall market expectation of ECB’s 10bp cut at by December, while also expect to see an extension of ECB’s QE scheme, stretching beyond Sept 2016.

The Danske Bank agrees with DB’s note that: “the transmission of deposit rate cuts packs a stronger punch and is more immediate than QE alterations. If the ECB decides to cut deposit rates, the implication will be forcing the EUR lower.

Aside having the same view as DB, the Danske Bank expects that the ECB will cut its deposit rate about “10bp to -30bp” at its next meeting in December this year. Depicting further that the ECB could possibly implement further cuts.

ECB deposit rate cut impact on EURUSD

Having analyzed these recent events and developments, the Danske Bank has adjusted its forecast for EURUSD. Tempering its expectations, Danske has now reduced its 1M and 3M forecasts of the pair:

“We have lowered our 1M and 3M EUR/USD forecasts to 1.10 and 1.08, respectively, as a further deposit rate cut is more EUR negative compared with our previous call of an extension of the QE programme.”

Altering its previous forecasts of EURUSD on the 1M and 3M, the Danske Bank still keep its anticipations on the longer-term in tact: “We maintain our 6M and 12M EUR/USD forecasts at 1.12 and 1.20 as medium-term fundamentals support a higher EUR/USD.”

Read also: How low can Draghi go?

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