A note late last week via Rabobank on the US dna the euro.

The bank is looking for lower in EUR/USD over the next 3 mopnths:

  • risk of pullbacks in EUR/USD though fresh direction may be absent until liquidity returns to normal levels in Septembe
  • We expect a move back to the EUR/USD 1.16/1.15 area on a three-month view

Reasoning, in summary:

  • USD's weakness in recent months can be explained by changes in fundamental factors, it is the intrinsic qualities of the USD rather than those of the US economy that defines its safe-haven appeal. These qualities are likely to ensure that the USD will continue to be a strong recipient of safe-haven flows on any further sharp pullbacks in risk appetite.
  • Relative growth rates, central bank policy, the path of China/US tensions and the outcome of the US election will all play their part in influencing the performance of the USD from day-to-day
  • Eurozone still faces significant economic challenges amid concerns about a second wave of COVID-19 in some areas. Additionally, the formation of the Italexit party on July 23rd suggests that fears of anti-EU sentiment cannot be entirely dismissed