According to a weekly bond bulletin by its asset management team
They say that the pair is currently at a pause after climbing to a peak of 1.25, arguing that yield differentials between the two markets "go some way in explaining this pause, as higher rates in the US may be acting as an anchor on a higher EUR/USD".
They also argue that monetary policy considerations may also be playing a role, as the market prices in three hikes for the Fed compared to no significant changes by the ECB. But they say that "a change in stance from the ECB could break the deadlock" and affect the exchange rate between the two currencies.
In their view, they say that a strong case can be made for both currencies "although on balance it is surprising the euro's upward move has recently lost momentum".
That said, they expect the twin deficit argument to win out in the end which will cause a higher move in EUR/USD towards 1.30 over the course of this year.
Certainly one of the bolder calls as the median forecast by most of Wall St firms lies around 1.25 based on Bloomberg's currency forecast data - as of last month. But the 1.30 forecast here is not far away from what the investment side of the firm sees, which is 1.29.
