Euro has still some chances.
The common currency dropped to the monthly lowest level versus dollar on Thursday after the European Central Bank promised to leave the interest rates unchanged “at least till the summer end of 2019”. But the regulator added a positive assessment of the Eurozone economic growth, where, as the ECB President Mario Draghi stated that the prices pressure is increasing while the international trade tensions ease.
Some analysts have seen some imbalance in that, which can promise the monetary policy tightening earlier than it’s been recently forecasted by the market players. This scenario could have supported Euro.
“The assumption that the interest rates will remain low ‘at least till the end of the summer 2019’ does not seem to be in accordance with the fundamental factors”, - Canadian Imperial Bank of Commerce’s head strategist for G10 currencies Jeremy Stretch says - “Despite the immediate correction, Euro has and can trade much higher in the medium-term perspective”.
CIBS forecasts that Euro will finish this year at $1.18 mark, as well as other economists expect according to Bloomberg survey. The forecast for the middle of the next year is $1.23, while the 2019 result level should be $1.28, the level which has not been seen since 2014. Although the median forecast of the analysts asked by Bloomberg has been decreased, it still underlines the Euro strengthening to 1.26 per dollar till the end of the next year.
Options also signal that the recent Euro weakness will go away. The euro-dollar pair risk-reversal indicators for 6 months and 1 year periods have reached two-weeks lowest bearish levels.