The euro is likely to 'weaken significantly' in Q1 - BAML

Author: Adam Button | Category: News

Bank of America Merrill Lynch sees 1.10 in EUR/USD

Bank of American Merrill Lynch analysts say the euro has overshot, in a note today. They forecast a drop back to 1.10 this quarter.

The euro has "overshot the data, market is long and underpricing Federal Reserve hikes and US tax reform impact," they say.

They see at least three Fed hikes this year and the risk of four hikes along with an ECB that's fighting the pressure to raise rates.

In the coming months, they believe the US dollar side of the trade will dominate "to a large extent driven by the impact from the US tax reform on the US economy and the FX and rates market."

After falling back to 1.10, they see a recovery to 1.19 by year-end then 1.25 at the end of 2019.

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